Supporters of Sri Lanka’s President Ranil Wickremesinghe watch a televised speech in Colombo, Sri Lanka, Wednesday, June 26, 2023. President Ranil Wickremesinghe in a televised address to the nation announced that the country had reached agreements with bilateral creditors including Japan, India, France and China, a key step in the island nation’s economic recovery since defaulting on its debt repayment in 2022.
Sri Lanka’s crisis was largely the result of staggering economic mismanagement combined with fallout from the COVID-19 pandemic, which along with 2019 terrorism attacks devastated its important tourism industry. The coronavirus crisis also disrupted the flow of remittances from Sri Lankans working abroad.Sri Lanka closes schools as the death toll from floods and mudslides rises to 16Additionally, the then-government slashed taxes in 2019, depleting the treasury just as the virus hit.
By 2022, Sri Lanka had to repay about $6 billion in foreign debt every year, amounting to about 9.2% of gross domestic product. The agreement would enable Sri Lanka to maintain debt payments at less than 4.5% of GDP between 2027 and 2032.