Debt distress and Ditwah

IN a recent television interview, the Central Bank Governor Dr. Nandalal Weerasinghe, stated that while Cyclone Ditwah had devastating impacts on society, the subsequent reconstruction and rebuilding phase would nevertheless sustain GDP projections while boosting sectoral performance. He further indicated that Sri Lanka's Debt Sustainability Analysis (DSA) would remain unchanged as no significant fresh debt would be drawn for reconstruction purposes. This is a stunning admission: that the impacts of a once-in-a-generation cyclone that destroyed agriculture, infrastructure, and livelihoods across regions and sectors, would have no bearing on Sri Lanka's debt-repayment capacity. Despite a long and well-documented history of net productivity losses and permanent asset-stock destruction following major natural disasters and climate events, the Governor maintained that Sri Lanka's path to debt sustainability remains unchanged.

- By Kusum Wijetilleke

A December 2025 letter published by UK-based nonprofit Debt Justice and signed by over 120 internationally recognised economists, led by American Nobel Prize winner, Joseph Stiglitz, calls on the Sri Lankan Government to suspend debt repayments and reconsider its debt restructuring following the devastating impacts of Cyclone Ditwah. This policy position has been grossly misrepresented and mischaracterised by the media, commentary, intellectual class and crucially, by the governing administration and members of the broader political class. Governor Weerasinghe was scathing in his rebuke, claiming signatories to the letter were merely academics, rather than professional economists.

Joseph Stiglitz served as Chief Economist and Senior Vice President of the World Bank, placing him at the centre of policy design, lending frameworks, and development strategy at the world's most influential multilateral financial institution.

Yanis Varoufakis served as Greece's Finance Minister during the height of the Eurozone sovereign-debt crisis, directly negotiating with the European Central Bank, the European Commission, and the IMF.

Martín Guzmán, as Argentina's Minister of Economy from 2019 to 2022, led one of the largest sovereign debt restructurings in modern history, conducting complex negotiations with both private bondholders and the IMF.

Jayati Ghosh has held advisory and commission roles linked to the Government of India, including work associated with national planning and macroeconomic policy, complementing her extensive engagement with international economic governance.