Restructuring alone not enough to sustain SL's debt gains: IMF

► POINTS OUT COUNTRY FACES A COMPLEX POST-RESTRUCTURING DEBT PORTFOLIO THAT REQUIRES STRONGER PUBLIC DEBT MANAGEMENT AND CONTINUED FISCAL DISCIPLINE ► ASSERTS THERE IS NO ROOM FOR SLIPPAGE ON FISCAL FRONT

- 

Sri Lanka's sovereign debt restructuring has eased the borrowing costs and restored investor access to financial markets. However, all is not rosy yet, as the country faces a complex post-restructuring debt portfolio that requires stronger public debt management and continued fiscal discipline, according to a new International Monetary Fund (IMF) working paper.

The domestic financing conditions have largely normalised, following the bond exchange. The treasury bill interest rates fell to around 8.5 percent by March 2025 and the authorities have begun issuing a substantial share of domestic debt in longer-term treasury bonds, a move the IMF said is critical for managing the refinancing risks and achieving a durable reduction in gross financing needs.

The domestic debt operations implemented in September 2023 helped alleviate the immediate pressures, allowing private credit growth to resume and supporting the ongoing economic recovery.

Despite these improvements, the IMF cautioned that restructuring alone cannot ensure debt sustainability.