Experts Call for Immediate Suspension and Restructuring of Sri Lanka's Debt Following Cyclone Ditwah Devastation
A group of 120 global experts, including Nobel laureate Joseph Stiglitz, have urged an immediate suspension of Sri Lanka's external sovereign debt payments and a new debt restructuring in light of the widespread devastation caused by Cyclone Ditwah. The cyclone, which killed more than 600 people and destroyed hundreds of thousands of homes, has been described by President Anura Kumara Dissanayake as the largest and most challenging natural disaster in Sri Lanka's history.
Sri Lanka's $9 billion national debt was previously restructured last year following a 2022 default, with debt repayments consuming about 25% of government revenues before the cyclone struck. Experts warn that the scale of the disaster will absorb or surpass the limited fiscal space created by the current debt package, despite additional lending already underway from the International Monetary Fund (IMF), and more lending being likely.
The experts advocate for an immediate suspension of external debt payments and a comprehensive restructuring to restore debt sustainability under these new circumstances. Signatories to this call include notable economists such as Joseph Stiglitz, Jayati Ghosh, Thomas Piketty, Martín Guzmán, and Kate Raworth.
In response to the disaster, Sri Lanka has requested a $200 million IMF emergency loan under the rapid financing instrument, which typically requires repayment within three to five years. Debt Justice has highlighted that even after the 2024 debt restructuring, private creditors are still projected to earn about 40% more profit from lending to Sri Lanka compared to lending to the US government.
Additionally, World Weather Attribution has linked climate warming to increasingly severe flooding in the region, with spillover effects impacting countries such as Indonesia and Malaysia. The United Kingdom has pledged £1 million in humanitarian aid to assist the affected populations.
