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### Introduction — overview and key context
- Sri Lanka’s public debt became unsustainable in the run up to its 2022 crisis following policy missteps and insufficient preparation for shocks.
- Government revenue:
  - about 8 percent of GDP in 2022;
  - about 12 percent of GDP in 2019;
  - 18 percent of GDP in the early 1990s;
  - averaged less than 13 percent of GDP during 2005-18.
- Debt dynamics and crisis events:
  - Debt to GDP rose to 126 percent in 2022.
  - Suspension of external debt payments announced in April 2022; default occurred in May 2022.
  - Authorities sought IMF financial support under an EFF in March 2022 and announced moratoria the month after.
  - Restructuring involved both foreign and domestic claims and a diverse creditor base, one of the most complex sovereign debt restructurings to date.

### From default to restoring sustainability — high-level findings
- Foreign exchange and market access:
  - Exhausted most FX reserves to cover external debt payments, including maturities of three ISBs totaling USD 2.5 billion in October 2020, July 2021, and January 2022.
  - Sovereign spreads rose above 2,000 basis points in April 2020.
- DSA and program design:
  - IMF DSA found public debt on an explosive path and assessed unsustainable.
  - EFF-supported program goals: restore medium-term external viability and debt sustainability through macroeconomic adjustment and exceptional financing including debt relief.

### Characteristics of Sri Lanka’s debt problems
- Structural and policy vulnerabilities:
  - REER appreciated by 30 percent in 2005-15 and remained 20 percent above its 2005 level by 2018.
  - NIIP declined from USD -36 billion to USD -49 billion between 2012 to 2018.
  - Quasi-fiscal exposures from loss-making SOEs (notably CEB and CPC) created contingent liabilities.
- Contributions to debt dynamics (cumulative, percent of GDP):
  - Primary deficits (2005-18): 17 percent of GDP.
  - Currency effects by 2018: 17 percentage points.
  - Large depreciation in 2022: 27 percent of GDP.
  - Loose fiscal stance in 2019-22 after tax cuts: 17 percent of GDP.
  - Central government assuming SOE debt in 2022: >4 percent of GDP.
  - Strong annual growth averaging 5.6 percent previously offset some accumulation but was absent during 2022 depreciation.

### Restoration of external viability — ARA, reserves, and BOP adjustment
- ARA metric composition (weights used):
  - Short-term external debt: 30 percent
  - Exports: 5 percent
  - Broad money: 5 percent
  - Other external liabilities: 15 percent
- Reserve target:
  - At 100 percent of the ARA metric in 2027, reserves expected to reach over USD 14.2 billion, or 6 months of imports.
  - Import metric of 6 months is above the typical 3 months for floating regimes.
- BOP parameter design:
  - Required external adjustment to rebuild reserves to 100 percent of the ARA metric by 2027 expected via current account rebalancing primarily through REER realignment.
  - Large external debt payments due during the program (USD 28 billion) make required real exchange rate adjustment infeasible without exceptional financing including debt relief.
  - Short-term debt coverage metric contributed close to USD 3 billion to reserve requirements.

### Required balance of payments relief and financing package (program period 2023-27)
- Debt service reduction needed during program period: USD 17 billion.
- Complementary concessional financing committed: USD 6.8 billion (jointly by the IMF, the World Bank, and the Asian Development Bank).
- Implication of USD 17 billion relief target:
  - Only USD 4 billion in debt service could be paid during 2023-27 on debt authorities indicated would be subject to restructuring (out of total USD 28 billion claims over the program period).

### Debt sustainability strategy and macroeconomic adjustment
- Restoration approach: macroeconomic adjustment + concessional financing + debt relief.
- Macroeconomic targets and assumptions:
  - Primary balance target: 2.3 percent of GDP.
  - Emphasized realistic fiscal adjustment frontier based on historical experience and significant REER adjustment.
- SRDSF application:
  - SRDSF features: time-horizon specific risk assessments; stochastic analysis and stress testing; country-specific debt carrying capacity proxies.
  - Two modules combined:
    - Debt fanchart module (probability distribution of debt levels; fanchart risk metric).
    - GFN module (analyzed GFNs and banking sector exposure under stress scenarios calibrated on country history).

### Country-specific debt carrying capacity factors
- Financial deepening after 2009:
  - Captive superannuation funds: assets over 10 percent of GDP investing almost all assets in government securities.
  - Banking sector assets around 80 percent of GDP.
- Comparative averages:
  - Private savings in selected emerging/middle-income economies averaged 25.5 (average 2015-19).
  - Bank assets in selected lower middle income countries averaged 66.2 (average 2015-19).
- External mitigating factors:
  - Tourism ~ USD 4 billion a year, or 4 percent of GDP.
  - Remittances ~ USD 6 billion a year, or 6 percent of GDP.

### Program debt sustainability targets (post-program / 2027-32 and 2032)
- Post-program GFN target: 13 percent of GDP per annum (average 2027-32). Reference: historical average GFNs 23 percent per annum in 2013-22.
- Debt stock target: 95 percent of GDP by 2032.
- Post-program FX debt service target: 4.5 percent of GDP (annual ceiling for 2027-32).
  - Implication: restructured debt service limited to around 2 percent of GDP.
  - Reference: government FX debt service averaged 9 percent of GDP in 2013-22.

### Implications for depth and design of debt treatment
- Depth of debt treatment determined by debt targets, macro assumptions, and realized economic performance.
- Better-than-program GDP trajectory reduces required debt relief ceteris paribus; worse performance increases relief needs.
- Motivated discussion on state contingent debt treatments to manage uncertainty.

### Restructuring targets and projections (external debt)
- Post-restructuring external debt projected to decline from 69 percent of GDP in 2022 to 41.5 percent of GDP in 2032 (reduction of 27 percent of GDP).
- Present value of external debt as of 2032 will remain at 36 percent of GDP due to concessional financing.
- LIC DSF thresholds for reference:
  - High debt carrying capacity threshold: 55 percent of GDP (PV external debt-to-GDP).
  - Medium debt carrying capacity limit: 40 percent of GDP (PV external debt-to-GDP).

### Domestic debt, absorption capacity, and fiscal framework
- As of 2032, majority of debt (50 percent of GDP) expected to be held domestically.
- Historical average government domestic debt in 1970-2018: 44 percent of GDP.
- Banking system health expected to continue improving during and beyond the EFF.
- Fiscal legal constraint: legally mandated primary fiscal expenditure ceiling of 13 percent of GDP per Public Financial Management Act 2024.

### Debt service and interest-to-revenue trajectory
- Interest-to-revenue ratio:
  - Around 80 percent in 2022-23.
  - Around 35 percent by 2035.
- Distribution of interest payments: 75 percent provided to the local financial system.

### Creditor composition and coordination challenges (end-2022 baseline)
- Total government debt (2022): 83,670 (100.0 percent total debt; 125.8 percent of GDP).
- Total government debt (2023): 98,758 (100.0 percent total debt; 115.8 percent of GDP).
- External (foreign law) debt (2022): 41,549 (49.7 percent total debt; 62.5 percent of GDP).
- External (foreign law) debt (2023): 43,323 (43.9 percent total debt; 50.8 percent of GDP).
- Selected creditor breakdowns (2022):
  - Multilateral creditors: 11,519 (13.8 percent total debt; 17.3 percent of GDP).
    - IMF: 1,062 (1.3 percent total debt; 1.6 percent of GDP).
    - World Bank: 3,839 (4.6 percent total debt; 5.8 percent of GDP).
    - ADB: 5,973 (7.1 percent total debt; 9.0 percent of GDP).
  - Bilateral creditors: 11,471 (13.7 percent total debt; 17.2 percent of GDP).
    - Paris Club: 4,784 (5.7 percent total debt; 7.2 percent of GDP).
    - Non-Paris Club: 6,687 (8.0 percent total debt; 10.1 percent of GDP).
    - China: 4,483 (5.4 percent total debt; 6.7 percent of GDP).
    - India: 1,883 (2.3 percent total debt; 2.8 percent of GDP).
  - Bonds (2022): 13,364 (16.0 percent total debt; 20.1 percent of GDP).
  - Commercial creditors (2022): 3,159 (3.8 percent total debt; 4.8 percent of GDP).
    - China Development Bank (2022): 2,901 (3.5 percent total debt; 4.4 percent of GDP).
  - Central bank bilateral currency swaps (2022): 2,036 (2.4 percent total debt; 3.1 percent of GDP).
  - Domestic (local law) debt (2022): 42,121 (50.3 percent total debt; 63.3 percent of GDP).
    - T-Bills (2022): 11,364 (13.6 percent total debt; 17.1 percent of GDP).
    - Bonds (2022): 25,124 (30.0 percent total debt; 37.8 percent of GDP).
    - Others (2022): 5,633 (6.7 percent total debt; 8.5 percent of GDP).

### Domestic debt operations (DDO) — strategy, components, and impacts
- Domestic market access preserved during external default, but at high costs:
  - Treasury bill–policy rate spread widened to almost 2000 bps at peak.
  - Domestic debt reached 63 percent of GDP at end-2022; domestic interest costs rose to 7 percent of GDP.
  - Refinancing in 2023: domestic maturities amounting to 25 percent of GDP; gross financing needs around 33 percent of GDP.
- Financial sector exposures:
  - Banks (assets close to 80 percent of GDP) held ~40 percent of assets in government securities.
  - Pension funds (assets >10 percent of GDP) invested almost entirely in government securities.
  - CBSL increased holdings of T-bills via monetary financing during the crisis.

- Four major DDO operations (implementation timeline mostly July–September 2023; CPC restructuring in late 2024):
  1. Redenomination of commercial banks’ holdings of FX local law bonds and loans:
     - FX local-law debts: ~3 and 7 percent of total domestic debt respectively.
     - 99.6 percent of these creditors (predominantly banks) opted for redenomination.
     - New instruments: five variable coupon local currency bonds indexed to the monetary policy rate (SLF Rate plus 1 percent), maturities 2025–2033.
     - FX liquidity relief: ~ USD 1 billion during program period.
     - Medium-term GFN reduction: annual average 0.11 percent of GDP in 2027-32.
     - Central bank net-lent state banks USD 225 million (0.27 percent of GDP) to cover NOPs.
  2. Reprofiling of superannuation funds’ holdings of Treasury Bonds:
     - End-2022 holdings: > Rs 3.2 trillion (over a third of outstanding).
     - Lengthened maturity ~5 years, initial coupon 12 percent stepping down to 9 percent in 2026.
     - Participating funds exempted from planned tax increase on superannuation income (14 percent → 30 percent).
     - Execution: September 2023.
  3. Restructuring of CBSL’s holdings of Treasury Bills:
     - CBSL held Rs 2.7 trillion (11 percent of GDP) of T-bills end-2022.
     - Exchange into instruments maturing 2029–38 with step-down interest: 12.4 percent through 2024, 7.5 percent through 2027, 5 percent thereafter.
     - Execution: September 2023.
     - CBSL equity improved to 1 percent of GDP by end-2024.
  4. Restructuring of CPC’s FX loans from state-owned banks:
     - Liabilities ~ USD 2.3 billion transferred to the government.
     - Agreement in late 2024: restructured into 20-year USD instruments with grace to 2027.
     - Ad hoc accounting mitigated banks’ FX NOP market value losses.

- DDO impact:
  - First three elements lowered debt service by annual average of 1.2 percent of GDP in 2023-27.
  - GFNs in 2027-32 fell on average by 1.7 percent of GDP per year.
  - Contributed to a 5 percent of GDP reduction in debt by avoiding high-rate borrowing in 2023-24.
  - Clarified domestic contribution to debt relief and set stage for external restructuring.

### External restructuring — perimeter, targets, and restructurable claims
- Restructuring perimeter excluded loans from multilateral lenders, bilateral currency swaps from foreign central banks, and emergency financing received during 2022 (about one third of foreign debt).
- Four major creditor groups held 97 percent of restructurable external claims as of end-2022.
- Restructurable external claims (USD billions) — End-2022 / End-2023:
  - Official Sector: 10.3 / 10.6
    - OCC (Paris Club, India, Hungary): 5.7 / 5.9
    - China (including ECA backed): 4.3 / 4.4
    - Other non-OCC bilaterals: 0.3 / 0.3
  - Private Sector: 16.4 / 17.8
    - ISBs: 13.2 / 14.2
    - China Development Bank: 3.0 / 3.3
    - Others: 0.2 / 0.2
  - Total: 26.7 / 28.3
  - Note: difference between end-2022 and end-2023 exposures driven by accumulation of arrears.

- Flow targets and constraints:
  - USD 17 billion program period external debt relief target caps total debt service payable to restructurable creditors through 2027.
  - Two flow targets for 2027-32: 4.5 percent of GDP post-program FX debt service; 13 percent of GDP post-program GFNs.
  - Of 4.5 percent of GDP FX debt service allowed post-program, about 2.5 percent of GDP allocated to non-restructurable debt and projected new financing.

### Creditor coordination, SCAs, and LIOA/LIA
- G-20 Common Framework unavailable given middle-income status; parallel approach used early due to lack of unified official creditor committee.
- IMF staff convened three official creditor meetings Oct–Dec 2022 and used “good offices” to support an official creditor coordinating platform.
- SCAs obtained via parallel approach:
  - India and China provided adequate SCA between January and March 2023.
  - Paris Club creditors (joined by Hungary) provided financing assurances in February 2023.
  - These responses satisfied LIOA requirements for IMF financial support.
- LIA assessed authorities’ interactions with private creditors as meeting good faith criteria.

### Private creditor engagement and ISB restructuring outcomes
- ISB bondholder representation volatility:
  - Steering committee initially represented ~50 percent of outstanding bondholders, later <40 percent.
- Timeline and milestones:
  - EFF approved March 20, 2023; negotiations intensified after DSA publication.
  - Authorities pursued parallel engagement and implemented DDO in August/September 2023.
  - Agreements in Principle with China EXIM in October 2023 and with Official Creditor Committee in November 2023; final agreements and MOUs signed June 2024.
- Bondholder agreements (key features and innovations):
  - Step-up Baseline Structure:
    - Nominal principal haircut: 27 percent.
    - Past Due Interest (PDI) haircut: 11 percent (March 2024 PDI stock).
    - Amortizations 2029–2038 with USD 3 billion amortized by 2032 and USD 6.2 billion by 2038.
    - Low coupons 2024-32 (average 3.7 percent), stepping up post-2032 to 9.4 percent on remaining stock; average length 3.7 years.
    - NPV/NPV relief at 9 percent discount rate: 42 percent.
  - Macro-linked payments (MLBs):
    - Coupon and principal changes triggered by average dollar GDP 2025-27 and cumulative real GDP growth 2024-27.
    - Two downside and three upside scenarios; principal adjustments ranged -17 percent to +16 percent; effective coupon increases up to 1.4 percent; no coupon reductions for downside scenarios.
  - Governance-linked bonds: 75 bps coupon relief from one bond if fiscal governance criteria met (revenue-to-GDP targets by 2027 and publishing fiscal strategy statements).
  - Local option for domestic holders: exchange mechanics with discretion to pay in local currency for some dollar bonds.
  - Contractual clauses included MFC, loss reinstatement clause, and law-change mechanism based on supermajority consent.
- Exchange mechanics and participation:
  - Exchange launched Nov 25, 2024; consent deadline Dec 12, 2024.
  - 96 percent of investors accepted by deadline.
  - Ten of eleven bonds moved from 98 percent to 100 percent after CAC aggregation; one bond at 73 percent due to holdout (HRB).
  - 14 percent of bondholders (domestic) chose domestic non-contingent option.

### Market reaction, ratings, and outcomes
- Bond prices: ~23 cents per dollar in Nov-2022 → ~65 cents ahead of restructuring.
- Weighted average spreads: ~6,300 bps → ~1,900 bps pre-restructuring.
- Sovereign spreads: ~1,900 bps pre-restructuring → ~520 bps in mid-Jan-2025 for non-macro-linked 2035 bond.
- Exit yields: around 9 percent.
- Rating actions: Moody’s and Fitch upgraded sovereign rating three notches after bond restructuring; Moody’s assigned Caa1 to new MLB issuance; S&P awaited completion of USD 175 million Sri Lanka Airlines bond restructuring.
- Spreads rose after U.S. tariffs announcement in April 2025.

### Overall debt relief, projections, and compliance with program targets
- External creditors forgave USD 3 billion and stretched USD 25 billion due in near term or overdue over much longer horizon with reduced interest rates.
- FX debt service projected to remain below 4.5 percent of GDP during 2027-35.
- Gross financing needs target (average 13 percent of GDP) met.
- Public debt stock projected to fall below sustainability target with some buffers given MLB probability of additional payments.
- NPV relief metrics:
  - NPV/NPV relief at 9 percent discount rate (baseline MLB step-up baseline): 42 percent.
  - Overall NPV relief for total restructured debt: ~41 percent (baseline MLB), 37 percent (highest MLB state).
  - Metrics close to median NPV haircuts (~39 percent) in 1998-2020 restructurings (at exit yields).

### Methodology for assessing SCDIs (Box 1) — stochastic approach and findings
- SRDSF debt fanchart module used to build distributions for debt and GFNs around baseline and to add SCDI payments per trigger design.
- Assessment criteria:
  - Whether SCDI increases probability of breaching targets vs non-contingent restructuring.
  - Whether SCDI raises debt/GFN in downside scenarios relative to plain vanilla replacements.
  - Tail risks from SCDI payments.
- Sri Lanka empirical outcomes (2024 proposals and Sep 18 AIP):
  - Probabilities of breaching debt and GFN targets were below acceptable thresholds:
    - Debt/GDP probabilities easily below 50 percent threshold.
    - GFN/GDP probabilities just below threshold defined by noncontingent DSAs at GFN target.
  - In most adverse scenarios where GFN target exceeded, SCDIs did not add to GFNs relative to plain vanilla bonds.
  - 90th percentile contributions to average GFNs from SCDIs below 0.4 percent of GDP.
  - Nominal cap: maximum SCDI payments capped at around USD 250 million annually.
- Methodological caveats:
  - Risks from one-time tests and valuation timing (e.g., exchange rate valuation at test date) can produce front-loaded higher payments.
  - Analysis tests probability and tail contributions but cannot perfectly capture all political and valuation risks.

### Lessons from restructuring and policy implications
- Restructuring design considerations:
  - DDOs must balance sovereign relief with financial/social stability; limited financial buffers can reduce net fiscal gains.
  - Proper valuation (discount rates) and rapid execution reduce unexpected fair value losses and market disruption.
  - SCDIs can align creditor-debtor risk sharing but introduce complexity, negotiation delays, and potential political acceptability issues for future payments.
  - Complexity of instruments underscores need to strengthen public debt management capacity and consider monetary policy interactions.
- Comparability of Treatment (CoT) and PDI issues:
  - Large PDI (USD 1.7 billion on ISBs as of end-2023 vs USD 12.5 billion principal) complicates CoT and incentives.
  - Clearer CoT assessment tools (OCC Secretariat, CoT matrices) and greater disclosure can aid coordination.
- Process lessons:
  - Delay in restructuring deepened the crisis; timely action matters.
  - Clear communication on DDO perimeter, parameters, and timeline reduces market volatility.
  - IMF role: set macro framework and DSA targets, facilitate engagement, provide “good offices”, and assess SCDIs — while remaining arm’s length from bargaining.

### Assessing effectiveness of relief and the way forward
- Measurement complexities:
  - Single metrics (nominal haircuts vs NPV, coupon reductions, maturity extensions) can mislead; NPV highly sensitive to discount rate (example: relief nearly doubles if discount rate rises from 5 percent to 10 percent).
  - Debt targets and macroeconomic/financing assumptions jointly determine required depth of relief.
- Current status and priorities:
  - Restructuring near-complete; domestic financing conditions normalized.
  - Treasury bill rates normalized to around 8.5 percent by March 2025.
  - Domestic debt overhang alleviated; full-blown banking crisis averted; recapitalization contingency not needed; private credit growth resumed.
- Remaining vulnerabilities and policy imperatives:
  - Strengthen public debt management to handle more complex post-restructuring portfolio.
  - No room for fiscal slippage; continue prudent macro policies and stronger institutions during and after EFF.
  - Align new borrowing with program objectives; monitor primary fiscal balance both above and below-the-line to capture borrowing.
  - Structural reforms: implementation of PFM and PDM Acts, prudent public investment program, sound procurement, and thorough cost/risk analysis before new debt contracts.
  - In the longer term, regaining and sustaining market access is critical for development funding as a middle-income country.

*Source: IMF staff — excerpts from the IMF working paper chapter (wpiea2025175-source-pdf).*

### Introduction ...........................................................................................................

### Introduction

### Overview and key context
- Sri Lanka’s public debt became unsustainable in the run up to its 2022 crisis following policy missteps and insufficient preparation for shocks.
- By 2022 government revenue amounted to about 8 percent of GDP compared to about 12 percent in 2019 and 18 percent in the early 1990s.
- Government revenue averaged less than 13 percent of GDP during 2005-18.
- Debt to GDP rose to 126 percent in 2022.
- Sri Lanka announced suspension of external debt payments in April 2022, and default occurred in May 2022.
- The authorities formally sought IMF financial support under the Extended Fund Facility (EFF) in March 2022, and announced moratoria on their foreign debt payments the month after.
- The restructuring involved both foreign and domestic claims and a diverse creditor base, making it one of the most complex sovereign debt restructuring cases to date.

### From default to restoring sustainability — high-level findings
- The country exhausted most of its foreign exchange (FX) reserves to cover external debt payments, including maturities of three International Sovereign Bonds (ISBs) totaling USD 2.5 billion in October 2020, July 2021, and January 2022.
- Sovereign spreads rose above 2,000 basis points in April 2020, effectively shutting Sri Lanka out of international capital markets.
- IMF Debt Sustainability Analysis (DSA) found Sri Lanka’s public debt on an explosive path under current and feasible policies and assessed the situation as unsustainable.
- The EFF-supported program was designed with dual goals: restoring medium-term external viability and debt sustainability, relying on macroeconomic adjustment combined with exceptional financing including debt relief.

### Characteristics of Sri Lanka’s debt problems
- Structural and policy vulnerabilities:
  - Real Effective Exchange Rate (REER) appreciated by 30 percent in 2005-15 and remained 20 percent above its 2005 level by 2018.
  - Net International Investment Position (NIIP) declined from USD -36 billion to USD -49 billion between 2012 to 2018.
  - Growth in access to international bond markets increased future FX requirements to service external debts.
  - Quasi-fiscal exposures from loss-making SOEs (notably Ceylon Electricity Board (CEB) and Ceylon Petroleum Corporation (CPC)) created contingent liabilities.
- Debt dynamics contributions (cumulative, percent of GDP):
  - In the pre-crisis period (2005-18), cumulative primary deficits contributed 17 percent of GDP to rising debt.
  - Currency effects added 17 percentage points to debt to GDP by 2018.
  - Large depreciation in 2022 added 27 percent of GDP in debt.
  - Loose fiscal stance in 2019-22 after tax cuts added a further 17 percent of GDP in debt.
  - Central government assuming SOE debt increased its debt stock by more than 4 percent of GDP in 2022.
  - Strong annual growth (averaging 5.6 percent) had previously offset some debt accumulation but was absent during the 2022 depreciation episode.

### Restoration of external viability and debt sustainability — program design and BOP considerations
- Medium Term External Viability objective:
  - Restore the country’s balance of payments (BOP) position and central bank reserves to safe levels.
  - Use the Assessing Reserve Adequacy (ARA) metric to identify appropriate reserve coverage in market access countries.
- ARA metric composition (weights as used in assessment):
  - Short-term external debt (30 percent)
  - Exports (5 percent)
  - Broad money (5 percent)
  - Other external liabilities (15 percent)
- Reserve target and implications:
  - At 100 percent of the ARA metric in 2027 (the lower bound of recommended levels for emerging markets (IMF 2011)), Sri Lanka’s reserves are expected to reach over USD 14.2 billion, or 6 months of imports.
  - The import metric of 6 months is significantly above the 3 months of imports generally seen as safe thresholds for reserves in countries with floating regimes.
  - As a small open economy with a relatively large money supply and significant external liabilities, Sri Lanka requires larger amounts of reserves than the average lower middle income emerging market economy as buffers for external shocks even under a floating exchange rate regime.
- BOP parameter design and required adjustment:
  - Needed external adjustment to rebuild reserves to 100 percent of the ARA metric by 2027 is expected to be achieved through an external sector adjustment to rebalance the current account, primarily via real exchange rate realignment with fundamentals.
  - In a crisis with large inflation and eroded real assets, external adjustment is expected to be accompanied by large import compression, including through the wealth effect.
  - The sharp Rupee depreciation at the onset of the crisis, which largely passed through to inflation, did not appear to fully realign the real exchange rate, particularly with import restrictions in place; further REER depreciation was expected to support external adjustment.
  - The large amount of external debt payments due during the program period (USD 28 billion) implies that the real exchange rate adjustment needed to generate sufficient current account surpluses to offset these debt payments would be very large and infeasible—hence the need for exceptional financing including debt relief.

### Process milestones and institutional context (selected)
- Sri Lanka defaulted on external debt obligations in April/May 2022 and embarked on its first sovereign debt restructuring.
- The authorities hired financial and legal advisors for negotiations with creditors and pursued a comprehensive restructuring involving both domestic and external claims in the context of the IMF-supported program.

*Source: IMF staff — Introduction section of the referenced chapter.*

### 13. To provide sufficient balance of payments relief

### 13. To provide sufficient balance of payments relief

### Required balance of payments relief and financing package
- A reduction in external debt service by USD 17 billion was needed during the program period (2023-27) to provide sufficient balance of payments relief and ensure the appropriate rebuilding of central bank FX reserves (Figure 4).
- This debt relief complements the USD 6.8 billion financing contribution jointly committed by the IMF, the World Bank, and the Asian Development Bank.
- The USD 17 billion relief target implies only USD 4 billion in debt service could be paid out during the program period on debt the authorities indicated would be subject to restructuring (out of total USD 28 billion claims over the program period).
- A short-term debt coverage metric itself contributed close to USD 3 billion to the reserve requirements.

### Debt sustainability strategy and macroeconomic adjustment
- The sovereign’s debt sustainability would be restored through a combination of macroeconomic adjustment, concessional financing and debt relief.
- The required macroeconomic adjustment could include economic growth, fiscal adjustment, and financial and external sector policies (such as inflation, financial repression, real exchange rate appreciation) that reduce the real costs of debt.
- The design emphasized a feasible frontier of fiscal adjustment drawn from Sri Lanka’s historical experience to avoid implementation risks that could choke off growth.
- The Sri Lanka EFF design settled on a primary balance target of 2.3 percent of GDP along with a significant REER adjustment to balance these considerations.
- Any gaps between macroeconomic adjustment results and restoration of debt sustainability in the program macroeconomic framework would need to be closed by creditor debt relief; the depth of debt relief influences timing and terms of re-access to new bilateral or market financing.

### SRDSF application and methodological advances in the DSA
- The revamped DSA framework for market-access countries, the Sovereign Risk and Debt Sustainability Framework (SRDSF), was applied for Sri Lanka.
- The SRDSF differs from the predecessor by:
  - Allowing time horizon specific risk assessments.
  - Moving away from broad fixed thresholds on debt and financing needs toward a richer country-specific assessment backed by stochastic analysis and stress testing.
- The SRDSF combined two key modules:
  - Debt fanchart module
    - Represented probability distribution of different debt levels based on the country’s historical volatility.
    - Analyzed baseline debt, institutional strength, uncertainties around baseline projections, and probability of debt stabilization to generate a fanchart risk metric.
    - Improved on fixed debt limits by incorporating country-specific debt carrying capacity proxies.
  - Gross financing needs (GFN) module
    - Analyzed GFNs and exposure of the banking sector in the baseline and under a stress scenario featuring fiscal and exchange rate shocks and sharply reduced financing by foreign private creditors.
    - The stress scenario was calibrated on the country’s own history rather than equalized across countries.
    - Improved on fixed GFN limits by recognizing that some countries can manage larger GFNs depending on depth and maturity of domestic financing systems.
- By combining module signals, SRDSF generated a sustainability risk score; probabilistic thresholds were set based on back testing and IMF board guidance.

### Country-specific characteristics affecting debt carrying capacity
- Sri Lanka experienced significant financial deepening after 2009, with:
  - Captive superannuation funds (assets over 10 percent of GDP investing almost all assets in government securities).
  - A large banking sector with assets around 80 percent of GDP compared to most other lower middle-income countries.
- Private savings in selected emerging markets and middle-income economies averaged 25.5 (average 2015-19).
- Bank assets in selected lower middle income countries averaged 66.2 (average 2015-19).
- External mitigating factors for Sri Lanka’s capacity to bear external debt:
  - Tourism generating about USD 4 billion a year, or 4 percent of GDP.
  - Remittances receipts generating about USD 6 billion a year, or 6 percent of GDP.
- Externally, Sri Lanka’s susceptibility to shocks as a small open economy suggests low safe external debt levels and high adequate reserves levels; domestically deep financial system mitigates some risks.

### Debt sustainability targets set for the EFF program
- Multiple debt targets jointly determined a sustainable debt path for Sri Lanka; none should be interpreted individually to predict the depth of required debt relief.
- Post-program GFN target:
  - 13 percent of GDP per annum (average over 2027-32), set to ensure low rollover risk under baseline and stress scenarios.
  - For reference, Sri Lanka’s government gross financing needs averaged 23 percent per annum in 2013-22.
- Debt stock target:
  - 95 percent of GDP (by 2032), set to ensure debt reduction and high probability of debt stabilization based on the SRDSF fan chart module.
- Post-program FX debt service target:
  - 4.5 percent of GDP (annual ceiling for 2027-32), calibrated to Sri Lanka’s ability to generate and sustain FX earnings, domestic creditors’ ability to provide FX credit, and historical FX borrowing.
  - This target includes debt service associated with Sri Lanka’s non-restructured FX claims, including to International Financial Institutions, and its new FX borrowing.
  - A natural implication is that restructured debt service would be limited to a smaller portion (around 2 percent of GDP).
  - For reference, Sri Lanka’s government FX debt service averaged 9 percent of GDP in 2013-22.

### Implications for depth and design of debt treatment
- The debt targets and underpinning macroeconomic assumptions determine the depth of eventual debt treatment; most targets are expressed as ratios to GDP except the program period debt service reduction derived from a dollar target for the end-of-program FX reserves level.
- If the economy outperforms program assumptions (GDP trajectory), required debt relief to achieve the same debt sustainability targets will, ceteris paribus, be smaller, and vice versa.
- This inherent uncertainty motivated discussion on state contingent debt treatments.

*Source: IMF staff report excerpt, "13. To provide sufficient balance of payments relief" (wpiea2025175-source-pdf).*

### 23. The restructuring targets ensure a significant reduction in external debt. Based on the EFF Third

### 23. The restructuring targets ensure a significant reduction in external debt. Based on the EFF Third

### Debt reduction targets and projections
- Post-restructuring external debt is projected to decline from 69 percent of GDP in 2022 to 41.5 percent of GDP in 2032 (a reduction of 27 percent of GDP).
- As of 2032, the present value of external debt will remain at 36 percent of GDP due to the concessional nature of most financing provided to Sri Lanka.
- Comparison to LIC DSF thresholds:
  - Present value of external debt-to-GDP threshold for countries with high debt carrying capacity: 55 percent of GDP.
  - Limit for countries with medium debt carrying capacity: 40 percent of GDP.
- Figure referenced: Figure 9 compares pre vs. post adjustment and restructuring (flow metrics for 2027-32 vs. 2013-22; debt stock as of 2032 compared to 2022). Projections based on EFF Third Review macroframework.

### Domestic debt, absorption capacity, and fiscal framework
- Large domestic debt will continue to be a feature of Sri Lanka’s economy.
- As of 2032, the majority of Sri Lanka’s debt (50 percent of GDP) will be held domestically.
- Historical comparison: average government domestic debt in Sri Lanka in 1970-2018 was 44 percent of GDP.
- Domestic debt absorption: such domestic debt can be absorbed by its large domestic financial system.
- Banking system outlook: health of the banking system is expected to continue to improve during the rest of the EFF arrangement and beyond.
- Sovereign financial nexus: implications were incorporated into the macro-economic framework’s prudent growth estimates, limiting further downside risks.
- Fiscal legal constraint: legally mandated primary fiscal expenditure ceiling of 13 percent of GDP as per the Public Financial Management Act 2024.

### Debt service and traditional metrics
- Interest-to-revenue ratio trajectory:
  - Around 80 percent in 2022-23.
  - Around 35 percent by 2035.
- Distribution of interest payments: 75 percent of such payments provided to the local financial system.
- Historical note: These interest-to-revenue levels are similar to those Sri Lanka maintained in the 1990s before market access.
- Interpretation: While these ratios are higher than many peer countries, differences are primarily driven by Sri Lanka’s societal choice of a lower-than-median tax and spending fiscal framework.

### Creditor composition and challenges in coordination
- At the time of its default, Sri Lanka had about USD 80 billion government debt, split roughly 50/50 between foreign and domestic on a residency basis.
- Foreign creditor composition highlights:
  - ISB holders had progressively risen to Sri Lanka’s largest creditor group since 2007.
  - Non-bonded foreign commercial creditors (including China Development Bank) had more stable exposure.
  - Official sector debt split roughly equally between multilateral development banks and bilateral official creditors (including Paris Club and emerging non-Paris Club creditors such as China and India).
- Domestic creditor composition highlights:
  - Large portion held by captive superannuation funds and Sri Lanka’s relatively large banking sector funded primarily by household savings.
  - Monetary financing by the central bank led to substantial sovereign exposure in the central bank balance sheet.
- Coordination constraints:
  - G-20 Common Framework was unavailable to Sri Lanka given its middle-income status.
  - Full coordination among major bilateral creditors through a unified official creditor committee did not materialize by end-2022.
  - Parallel approach (separate discussions with different creditor groups) was used, which was demanding due to duplication, limited information sharing, and challenges ensuring comparability of treatment.
- Role of Fund staff:
  - Used “good offices” at the request of the Sri Lankan authorities and creditors to support an official creditor coordinating platform open to all bilateral creditors.
  - Convened three official creditor meetings between October and December 2022 to present creditor engagement strategy and preliminary debt treatment parameters.
  - IMF staff explained program parameters and policy requirements including financing assurances.

### Financing assurances, Specific and Credible Assurances (SCAs), and LIOA/LIA considerations
- SCAs from major bilateral creditors were eventually obtained through a parallel approach.
- SCAs in writing by senior government officials from all major bilateral creditors on providing debt relief in line with program parameters were needed before the IMF could assess debt sustainability restored on a forward-looking basis and move ahead with financing.
- Timeline and outcomes:
  - Adequate SCA outlining understanding of Sri Lanka’s debt problem and required debt treatment in line with IMF program parameters was obtained from India and China, through parallel tracks, between January and March 2023.
  - Financing assurances by Paris Club creditors (joined by Hungary) in February 2023.
  - These combined responses satisfied the LIOA requirements for the Fund to proceed with financial support to Sri Lanka under the EFF.
- LIOA/LIA policy notes:
  - Obtaining assurances when arrears have accumulated is governed by Lending into Official Arrears (LIOA) for official creditors and Lending into Arrears (LIA) for private creditors.
  - For minority creditors, consent under the LIOA was deemed sufficient; strand limitations meant Paris Club alone did not constitute a majority of financing contributions during the program period.

### Private creditor engagement and restructuring negotiations
- Main external private creditor groups: China Development Bank (CDB) and ISB bondholders (foreign group and local group under a consortium of eight domestic financial institutions).
- ISB bondholder representation: steering committee initially claimed to represent around 50 percent of outstanding bondholders, later dropping to below 40 percent.
- Confidential dialogue: NDAs were signed either directly with creditors (CDB and local ISB bondholders) or with their advisors (foreign ISB bondholders) following the authorities’ debt moratorium.
- Information sharing and dialogue:
  - Data and information were shared after the program macroeconomic framework was finalized upon reaching the staff-level agreement.
  - Investor presentations took place in October and December 2022 for commercial creditors.
  - Multiple rounds of discussions with reconciliation of DSA modeling sometimes with IMF staff participation.
- LIA policy assessment: authorities’ interactions with private creditors were assessed to meet the good faith criteria under the LIA policy; LIA requirements were satisfied.

### Restructuring designs, sequencing, and outcomes
- Timing:
  - EFF arrangement approved by IMF’s Executive Board on March 20, 2023.
  - Restructuring negotiations intensified after EFF approval and DSA publication.
- IMF role in restructuring phase:
  - Supported adjustment/reforms under the EFF arrangement and ensured proposed/agreed debt treatments aligned with program parameters.
  - Assessed progress in debt restructuring at each program review with a financing assurances review.
  - IMF was not a party to the restructuring and played no role in negotiations or determination of comparability treatment and inter-creditor equity.
- Authorities’ prerogative and strategy:
  - Design of restructuring terms guided by (i) debt sustainability targets under the IMF-supported program and (ii) IMF baseline macroeconomic framework.
  - Debt targets explicitly cover the 10-year period through 2032; they would remain the most appropriate benchmarks post-2032 unless the economy evolves significantly.
  - Authorities pursued parallel engagement with creditor groups, opting to implement a domestic debt operation (DDO) in August 2023 amid acute domestic financing challenges.
  - Further milestones: Agreements in Principle with China EXIM in October 2023 and with the Official Creditor Committee in November 2023; signatures of final agreements with China EXIM and MOUs with the OCC in June 2024.
- Observed costs and constraints of parallel approach:
  - Parallel strategy strained authorities’ capacity and proved costly due to punitive domestic financing conditions persisting while foreign debt restructuring was prolonged.

### Key statistics and table highlights (selected)
- Total public debt (2022): 83,670 (100.0 percent total debt; 125.8 percent of GDP).
- Total public debt (2023): 98,758 (100.0 percent total debt; 115.8 percent of GDP).
- External (foreign law) debt (2022): 41,549 (49.7 percent total debt; 62.5 percent of GDP).
- External (foreign law) debt (2023): 43,323 (43.9 percent total debt; 50.8 percent of GDP).
- Multilateral creditors (2022): 11,519 (13.8 percent total debt; 17.3 percent of GDP).
  - IMF (2022): 1,062 (1.3 percent total debt; 1.6 percent of GDP).
  - World Bank (2022): 3,839 (4.6 percent total debt; 5.8 percent of GDP).
  - ADB (2022): 5,973 (7.1 percent total debt; 9.0 percent of GDP).
- Bilateral creditors (2022): 11,471 (13.7 percent total debt; 17.2 percent of GDP).
  - Paris Club (2022): 4,784 (5.7 percent total debt; 7.2 percent of GDP).
  - Non-Paris Club (2022): 6,687 (8.0 percent total debt; 10.1 percent of GDP).
  - China (2022): 4,483 (5.4 percent total debt; 6.7 percent of GDP).
  - India (2022): 1,883 (2.3 percent total debt; 2.8 percent of GDP).
- Bonds (2022): 13,364 (16.0 percent total debt; 20.1 percent of GDP).
- Commercial creditors (2022): 3,159 (3.8 percent total debt; 4.8 percent of GDP).
  - China Development Bank (2022): 2,901 (3.5 percent total debt; 4.4 percent of GDP).
- Central bank bilateral currency swaps (2022): 2,036 (2.4 percent total debt; 3.1 percent of GDP).
- Domestic (local law) debt (2022): 42,121 (50.3 percent total debt; 63.3 percent of GDP).
  - T-Bills (2022): 11,364 (13.6 percent total debt; 17.1 percent of GDP).
  - Bonds (2022): 25,124 (30.0 percent total debt; 37.8 percent of GDP).
  - Others (2022): 5,633 (6.7 percent total debt; 8.5 percent of GDP).

*Source: wpiea2025175-source-pdf - 23. The restructuring targets ensure a significant reduction in external debt. Based on the EFF Third*

### 34. Sri Lanka was able to preserve its access to the

### 34. Sri Lanka was able to preserve its access to the domestic debt market during the external debt default, though at high costs.

### Domestic market access and fiscal costs
- Despite the moratorium on external debt service, Sri Lanka continued to honor domestic local currency debt obligations, allowing rollover of existing debt and placing new debt in domestic markets to finance operations.
- Uncertainties and lack of clear communication on whether domestic debt would be subject to restructuring raised default premia in domestic issuances; the Treasury bill–policy rate spread widened to almost 2000 bps at its peak (Figure 12).
- The punitive financing conditions during the sovereign default pushed:
  - domestic debt to 63 percent of GDP at end-2022; and
  - domestic interest costs to 7 percent of GDP.
- Refinancing risks in 2023: domestic debt maturities amounting to 25 percent of GDP needed to be rolled over in the market; total gross financing needs expected at around 33 percent of GDP.

### Financial sector exposures and stability trade-offs
- Commercial banks (with assets close to 80 percent of GDP) held around 40 percent of their assets in government securities, including T-bills, T-bonds, local law FX denominated debt (SLDB and others), and holdings of ISBs.
- Pension funds (with assets above 10 percent of GDP) held close to all their assets in government securities, mostly T-bonds.
- Central bank (CBSL) increased holdings of T-bills through monetary financing during the crisis.
- A deep domestic debt operation risked significant undercapitalization of the financial system, potentially requiring state recapitalization and neutralizing fiscal benefits to the sovereign while causing larger shocks to the real economy.

### Domestic Debt Operation (DDO) strategy and implementation
- Strategy objectives:
  - Reduce rollovers and interest costs;
  - Minimize fair value losses to domestic creditors;
  - Preserve financial and social stability while enabling government financing during the program period.
- Rationale: avoid mandating restructuring of commercial banks’ holdings of Treasury bonds to prevent depleting banks’ capital positions and destabilizing the financial sector.
- Investor Presentation provided details on July 7, 2023; implementation consisted of four major operations:

  1. Redenomination of commercial banks’ holdings of FX local law bonds and loans
     - FX local-law debts (SLDBs and FX loans by local commercial banks) constituted about 3 and 7 percent, respectively, of total domestic debt.
     - Creditors were offered: principal haircut option; maturity extension plus interest reduction option; redenomination option.
     - 99.6 percent of these creditors (predominantly banks) opted for the redenomination option.
     - New instruments: five variable coupon local currency bonds indexed to the monetary policy rate (Standing Lending Facility Rate plus 1 percent) with maturities from 2025 to 2033.
     - FX liquidity relief: around USD 1 billion during program period.
     - Medium-term gross financing need reduction: by an annual average of 0.11 percent of GDP in 2027-32.
     - Redenomination created a large net open position (NOP) on banks’ balance sheets; central bank net-lent state banks USD 225 million (0.27 percent of GDP) to allow more time to cover NOPs.
     - Execution: started in July 2023 and concluded in September 2023.

  2. Reprofiling of superannuation funds’ holdings of Treasury Bonds
     - As of end-2022, superannuation funds collectively held more than Rs 3.2 trillion of Treasury bonds (over a third of total outstanding).
     - Strategy: lengthen average weighted maturity by around 5 years at a 12 percent initial coupon rate (roughly equal to existing yield to maturity), stepping down to 9 percent in 2026 aligned with projected declining inflation.
     - Regulatory incentive: exempt participating funds from planned increase in superannuation fund investment income tax rate (from special rate of 14 percent to common corporate rate of 30 percent).
     - Execution: September 2023.
     - By H1 2025, domestic interest rates normalized significantly faster than expected in 2023, leading to smaller ex-post fair value losses for the EPF relative to ex-ante expected losses based on high discount rates.
     - Superannuation funds’ real value losses were largely due to the high inflation environment of 2022 (negative real returns).

  3. Restructuring of the CBSL’s holdings of Treasury Bills
     - As of end-2022, CBSL held Rs 2.7 trillion (or 11 percent of GDP) of Treasury bills acquired through primary market purchases during the pandemic.
     - These short-maturity, high-interest Treasury bills created large refinancing needs; CBSL was prohibited from rolling them over after changes to the Central Bank Act.
     - Exchange: CBSL’s short-term claims exchanged into multiple debt instruments maturing over 2029–38 with a step-down interest rate path: 12.4 percent through 2024, 7.5 percent through 2027, and 5 percent thereafter.
     - Execution: September 2023.
     - Fair value loss was smaller than initially expected as market interest normalized more quickly.
     - As of end-2024, CBSL’s equity position improved to 1 percent of GDP.

  4. Restructuring of CPC’s FX loans from State Owned Banks
     - Liabilities from the Ceylon Petroleum Corporation (CPC) towards the two state owned banks of around USD 2.3 billion were transferred to the government after the crisis.
     - Agreement in late 2024: FX loans restructured into long-term (20-year maturity) USD-denominated instruments with grace periods until 2027.
     - Ad hoc accounting treatments allowed to mitigate negative impact on banks’ FX NOPs from market value loss associated with the loan restructuring.

- Impact of DDO:
  - First three elements (concluded in 2023) lowered debt service by an annual average of 1.2 percent of GDP in 2023-27.
  - Gross financing needs in 2027-32 fell on average by 1.7 percent of GDP per year.
  - Contributed to a 5 percent of GDP reduction in debt by avoiding large borrowing in 2023-24 at high interest rates.
  - Domestic operation completion provided clarity to external creditors on domestic contribution to debt relief and set stage for external restructuring.

### External debt restructuring: perimeter, targets, and creditor composition
- Restructuring perimeter:
  - Loans from multilateral lenders, bilateral currency swaps from foreign central banks, and emergency financing received during the 2022 crisis were carved out; these constituted about a third of total foreign debt.
  - External debt restructuring negotiations focused on four major creditor groups holding 97 percent of total restructurable external claims as of end-2022.

- External viability and debt sustainability constraints:
  - USD 17 billion program period external debt relief target caps total debt service payable to restructurable creditors through 2027.
  - Two flow targets for 2027-32:
    - 4.5 percent of GDP post-program FX debt service; and
    - 13 percent of GDP in post-program GFNs.
  - A 95 percent of GDP debt stock target complements flow targets to prevent bunching of payments.

- Space for restructurable debt service further constrained by scheduled/projected payments on non-restructurable claims and new debt:
  - Of the 4.5 percent of GDP FX debt service allowed post-program, about 2.5 percent of GDP allocated to service non-restructurable debt and payments on projected new financing.
  - New financing assumed to come from: program financing from international financial institutions; project financing for public investment; and market financing via new ISB issuances starting 2027.

- Restructurable External Claims (In USD billions)
  - End-2022 / End-2023
    - Official Sector: 10.3 / 10.6
      - OCC (Paris Club, India, and Hungary): 5.7 / 5.9
      - China (including ECA backed): 4.3 / 4.4
      - Other non-OCC bilaterals: 0.3 / 0.3
    - Private Sector: 16.4 / 17.8
      - ISBs: 13.2 / 14.2
      - China Development Bank: 3.0 / 3.3
      - Others: 0.2 / 0.2
    - Total: 26.7 / 28.3
  - Note: The difference in exposure between end-2022 and end-2023 is primarily driven by accumulation of arrears.

### Creditor preferences and official restructuring coordination
- Creditor treatment preferences:
  - Official creditors typically prefer maturity extension and interest rate reduction and avoid principal haircut.
  - Private creditors are often more open to principal haircut in exchange for earlier payments and higher interest; some may demand contingent debt treatments for upside capture.
- Official restructuring coordination:
  - The Official Creditors Committee (OCC) (France, India, Japan co-chairs) was formed and met from May 2023; it broadly endorsed Sri Lanka’s restructuring perimeter and the authorities’ commitment to transparency and comparability of treatment (CoT).
  - Sri Lanka’s proposal and OCC Secretariat proposals featured common elements:
    - a grace period during the EFF program; a long maturity extension with progressive amortization; and significant interest reduction to deliver NPV relief.
  - Differences were mainly on how to assess CoT across creditor classes; IMF participation in OCC meetings and bilateral creditor engagement facilitated negotiations.

*Source: Excerpt from the IMF working paper chapter describing Sri Lanka’s domestic debt operations and external debt restructuring discussions.*

### 45. Sri Lanka made significant subsequent progress in reaching a debt resolution with the OCC. An

### Sri Lanka made significant subsequent progress in reaching a debt resolution with the OCC. An

### Debt resolution with the Official Creditor Committee (OCC) and major official creditors
- An AIP between Sri Lanka and the OCC, in line with the program parameters, was reached in November 2023.  
- After agreeing on financial terms, OCC discussions focused on safeguards to ensure non-participating creditors would not extract better terms and that Sri Lanka would remain committed to the EFF program.  
- In June 2024, Sri Lanka and the OCC agreed to codify the agreement in the form of a Memorandum of Understanding.  
- As of June 2025, the authorities reached bilateral agreements with Japan, India and France and were working on finalizing bilateral agreements with other individual OCC creditors.  

### Engagement with China EXIM Bank (parallel process)
- An AIP between Sri Lanka and the China EXIM Bank, in line with the program parameters, was reached in October 2023.  
- China EXIM did not formally join the OCC but participated as an observer in many OCC meetings.  
- China EXIM provided financing assurances in March 2023 and continued engagement with Sri Lanka’s debt advisors, including in-person discussions in Beijing and Colombo.  
- In June 2024, Sri Lanka finalized amendment agreements with China EXIM and started paying on the restructured facilities starting July 2024.  

### Remaining small bilateral creditors and official arrears
- Sri Lanka remained in arrears to Kuwait, Iran, and Pakistan, while restructuring agreements were signed with Saudi Arabia in July 2025.  
- Some of these creditors had signaled readiness to negotiate along the terms offered by the OCC.  
- Until an agreement to restructure is reached, these arrears would remain outstanding.  

### Private debt restructuring: process and timelines
- Authorities organized an investor presentation soon after EFF approval and received an initial restructuring proposal from foreign bondholders’ advisors on April 11, 2023.  
- Foreign bondholders presented a revised proposal publicly on October 13, 2023, featuring a macro-linked bond with state-contingent debt service.  
- Sri Lanka held restricted rounds of discussions with the bondholders’ committee in April 2024 and entered a second round of restricted negotiations, reaching a Joint Working Framework (JWF) in early July 2024.  
- IMF staff initially assessed the JWF as not meeting debt sustainability requirements under the IMF program; the OCC assessed the JWF as not meeting comparability of treatment principles.  
- Sri Lanka entered a third restricted period on September 12, 2024, and reached Agreement-in-Principle (AIP) with the committee on September 18, 2024. IMF staff assessed this AIP as consistent with the program’s debt sustainability targets (using the IMF methodology for state-contingent instruments). The OCC also assessed the AIP as consistent with comparability principles.  
- Authorities reached AIPs with the local consortium (representing 12 percent of ISBs) on September 18, 2024.  

### Key features of the bondholder agreements (innovations)
- Step-up Baseline Structure:
  - Nominal haircuts on principal amounted to 27 percent.  
  - 11 percent haircut on past due interest (PDI) based on the March 2024 PDI stock.  
  - Amortizations on non-PDI bonds start in 2029 and end in 2038, with USD 3 billion amortized by 2032, and the remaining USD 6.2 billion amortized by 2038.  
  - The PDI bond amortizes in 2024-28.  
  - Treatment featured low coupons in 2024-32 (average of 3.7 percent), stepping up post-2032 on the remaining stock (9.4 percent, for an average length of 3.7 years).  
  - NPV/NPV relief at a 9 percent discount rate was 42 percent.  
- Macro-linked Payments:
  - Coupon and principal changes triggered by average dollar GDP in 2025-27 and a control variable on cumulative real GDP growth in 2024-27.  
  - Structure included two downside and three upside scenarios.  
  - Principal adjustments ranged from additional principal haircuts amounting to 17 percent (on new bonds, in the lowest category) to additional principal reinstatement amounting to 16 percent (in the highest category).  
  - Effective coupon increases were 1.4 percent at their maximum levels, with no coupon reductions for downside scenarios.  
- Governance-Linked Bonds:
  - Creditors agreed to provide more coupon relief (75 bps) from one of the restructured bonds if Sri Lanka met two fiscal governance criteria (meeting targets on revenue to GDP by 2027 and publishing fiscal strategy statements).  
  - Revenue targets would be verified through publication of the statistics in the IMF’s World Economic Outlook.  
- Local Option:
  - Local consortium and state-owned banks (holding 14 percent of ISBs) agreed to a separate option without contingency payments.  
  - Exchange of 70 percent of exposure into dollar bonds with 10 percent nominal haircuts, low coupons and long maturity.  
  - These dollar bonds included a provision where Sri Lanka retains discretion to make debt payments in local currency. The rest of the exposure was exchanged for local currency (and local law) bonds at Sri Lankan market interest rates plus a small margin.  
- Contractual Clauses:
  - New bonds included “most favored creditor” clauses (MFC), excluding payments of any judgment which is final and non-appealable.  
  - Bonds featured a “loss reinstatement clause” allowing creditors upon certain events to increase principal and claw back relief.  
  - Included a mechanism to allow change of governing law of exchanged ISBs to English or Delaware law from New York law based on supermajority consent.  

### Bond exchange mechanics, participation, and outcomes
- Exchange launched on November 25, 2024, with a consent solicitation deadline of December 12, 2024.  
- By the deadline, 96 percent of investors had accepted to enter the bond exchange.  
- Authorities set a minimum participation threshold: required minimum 80 percent participation for the exchange to go forward; committed to complete the exchange if participation exceeded 90 percent and reserved discretion for participation between 80 percent and 90 percent.  
- Participation in ten of the eleven bonds went from 98 percent to 100 percent after use of the collective action clauses.  
- One remaining bond had participation of 73 percent due to the holdout creditor (Hamilton Reserve Bank (HRB)).  
- 14 percent of bondholders (domestic investors) chose the domestic non-contingent option.  

### Market reaction and ratings post-restructuring
- Prices of defaulted Sri Lankan bonds rose from about 23 cents per dollar of face value (weighted average spread of about 6,300 bps) in November 2022 to about 65 cents (weighted average spread of about 1,900 bps) just ahead of the restructuring.  
- Exit yields on the bonds hovered around 9 percent at completion of the exchange.  
- Sovereign spreads fell from a weighted average of 1,900 basis points just prior to the restructuring to around 520 bps in mid-January 2025 on the non-macro-linked bond (2035 maturity with governance-linked features).  
- Moody’s and Fitch upgraded Sri Lanka’s sovereign rating three notches after the bond restructuring; S&P awaited completion of the government-guaranteed USD 175 million Sri Lanka Airlines bond restructuring.  
- Moody’s also assigned a Caa1 rating to the new MLB issuance.  
- Spreads rose markedly following the United States’ announcement of tariffs in April 2025.  

### Agreements with other commercial creditors
- Technical exchanges with the China Development Bank (CDB) occurred in Colombo in May 2023 and in Beijing in October 2023 to reconcile DSA modeling.  
- Final AIP between Sri Lanka and the CDB was reached in November 2024; IMF staff assessed it as consistent with debt sustainability and the OCC assessed it as consistent with COT.  
- Sri Lanka completed treatment with CDB and started paying on restructured debt in December 2024.  

### Overall debt relief, projections, and compliance with program targets
- External creditors forgave USD 3 billion in debt and stretched another USD 25 billion due in the near term or already overdue over a much longer horizon with much reduced interest rates.  
- FX debt service is projected to remain below the debt sustainability target (4.5 percent of GDP) during the 2027-35 period.  
- The gross financing needs target (average 13 percent of GDP) is met.  
- Together with contributions from the DDO, the public debt stock is projected to fall below its sustainability target.  
- All targets are met with some buffers given the probability of additional payments through the macro-linked bonds.  
- NPV relief for total restructured debt was around 41 percent NPV/NPV (at 9 percent discount rate) in the baseline case of the MLBs, and 37 percent NPV/NPV relief in the highest growth state under the MLB.  
- These metrics are close to the median NPV haircuts (around 39 percent) in restructurings (at exit yields) over the 1998-2020 period.  

### Debt and financing indicators (selected numeric highlights)
- Step-up baseline: nominal principal haircut 27 percent; PDI haircut 11 percent (March 2024 PDI stock).  
- Amortization amounts: USD 3 billion amortized by 2032; USD 6.2 billion amortized by 2038.  
- Average coupon 2024-32: 3.7 percent; post-2032 coupon on remaining stock: 9.4 percent; average length 3.7 years.  
- NPV/NPV relief at 9 percent discount rate (baseline MLB): 42 percent (step-up baseline); overall NPV relief for total restructured debt around 41 percent (baseline MLB), 37 percent (highest MLB state).  
- Macro-linked principal adjustments: additional haircut up to 17 percent; additional principal reinstatement up to 16 percent; effective coupon increases up to 1.4 percent.  
- Participation in bond exchange: 96 percent accepted by deadline; ten bonds moved from 98 percent to 100 percent post-CAC aggregation; one bond 73 percent participation; 14 percent of bondholders chose domestic non-contingent option.  
- Bond price moves: ~23 cents in Nov-2022 → ~65 cents ahead of restructuring; weighted average spreads ~6,300 bps → ~1,900 bps pre-restructuring; non-macro-linked bond spread ~520 bps in mid-Jan-2025.  
- Exit yields: around 9 percent; Moody’s rating action: Caa1 on new MLB issuance.  
- FX DS sustainability target: 4.5 percent of GDP.  
- Gross financing needs target (average): 13 percent of GDP.  
- Public debt projections show declines consistent with targets (charting referenced in source).  

### Methodology for assessing State-Contingent and Debt Instruments (Box 1)
- IMF staff developed a stochastic methodology assessing three key risk elements from state contingent instruments:
  - Probability of breaching debt targets: methodology tests whether introducing SCDIs increases probability of breaching debt targets relative to a baseline where debt indicators are exactly at target. Note: baseline target as median implies probability close to 50 percent in distribution derived from historical data.  
  - Quality of the SCDI trigger and Size of Contingent Payment: methodology analyzes trigger relation to durable debt carrying capacity; a good trigger elicits higher payments only when debt carrying capacity is durably higher; minimizes probability mass of outcomes where debt metrics already above target but SCDI requires additional payments.  
  - Tail Risks: analysis of nominal caps and SCDI contributions to debt indicators in highest deciles of the debt distribution.  
- Methodology considerations include risks from one-time tests of SCDIs (e.g., exchange rate valuation at test date leading to higher payments followed by depreciation) and evaluates probability that SCDI payments exceed buffers to targets in the baseline.  

*Prepared from the IMF content unit "wpiea2025175-source-pdf - 45. Sri Lanka made significant subsequent progress in reaching a debt resolution with the OCC. An" (source PDF).*

### Box 1. Methodology for Assessing SCDI Debt Sustainability Risks (concluded)

### Box 1. Methodology for Assessing SCDI Debt Sustainability Risks (concluded)

### Methodological approach
- Implementation tool: SRDSF’s debt fanchart module.
- Steps:
  - Based on historical debt drivers, staff built the distribution of debt and gross financing needs (GFN) around the baseline as a debt and GFN fanchart.5
  - Payments from the SCDI (both upside and downside) were added to realizations of the fancharts in line with the trigger design of the SCDI, generating two fancharts: one with the SCDI and one without.
  - Comparison benchmark: outcomes with the restructuring including SCDIs versus a non-contingent restructuring in which SCDIs were replaced with plain vanilla bonds that completely exhausted any buffer to the targets under the baseline (the non-contingent restructuring).
- Assessment criteria:
  - i) whether the SCDI implies a higher probability of breaching the targets than under the non-contingent restructuring;
  - ii) whether under downside scenarios (scenarios in which at least one target is breached) the restructuring with SCDIs leads to higher debt burden indicators (debt or GFN) than the non-contingent restructuring;
  - iii) whether the tail risks from the SCDI are acceptable.

- Note on GFN fanchart (innovation): The GFN fanchart was generated by approximating GFNs through the debt drivers and a measure of financing type consistent with the DSA.

### Application and empirical outcome (Sri Lanka, 2024 proposals and September 18 AIP)
- Staff applied the methodology to various proposals discussed between the authorities and bondholders in 2024, and to the authorities’ September 18 AIP, which was consistent with debt sustainability objectives.
- Key empirical findings:
  - The probabilities of breaching the debt and GFN targets were both below the acceptable thresholds.
    - For the debt/GDP target, the probabilities were easily below the 50 percent threshold.
    - For the GFN/GDP target, the probabilities were just below the threshold as defined by the probabilities of breaches in noncontingent DSAs exactly at the GFN target.
  - In a large majority of adverse scenarios where the GFN target is already exceeded, the SCDIs did not add to GFNs relative to the plain vanilla bonds they replaced. This metric was more benign for the debt-to-GDP ratio given much larger buffers in the baseline DSA.
  - Tail risk metric: the 90th percentile contributions to average GFNs were below 0.4 percent of GDP.
  - Nominal cap: The SCDI is nominally capped, with maximum payments capped at around USD 250 million annually.

- Scenario triggers shown in the box figure (labelled Scenario 1, Scenario 2, Scenario 3):
  - Scenarios 1, 2, and 3 are triggered if dollar GDP in 2025-27 exceeds USD 107 billion, USD 99 billion and USD 94 billion, and 2024-27 cumulative real growth exceeds 11.5%.

### Lessons from Sri Lanka’s restructuring — overview
- Three overarching design and process considerations highlighted by the Sri Lanka case:
  - Careful consideration of domestic debt operation implications for financial and social stability.
  - Prudential assessment of state-contingent debt instruments (SCDIs) for debt sustainability and comparability of treatment.
  - Management of complexity in debt instruments and the need to strengthen debt management capacity.

### A. Restructuring designs — findings and implications
- DDO and financial/social stability:
  - The DDO balanced sovereign financing relief with preserving financial and social stability.
  - Lack of buffers in the financial sector limited the net gain from DDOs because debt relief to the government could increase public recapitalization costs.
  - Important to assess DDOs through multiple lenses, including whether regulatory forbearance could hinder confidence rebuilding.
- Valuation and timing:
  - Use a proper discount rate to crystallize fair value impacts on financial institutions; ex-ante underestimation can force recognition of higher losses at completion.
  - Speed of DDO resolution is crucial; delay triggered adverse market developments and deepened the debt problem.
- SCDIs design trade-offs:
  - SCDIs can resolve differing macro outlook views by allowing creditors to trade upfront recovery for potential future recovery.
  - However, in Sri Lanka SCDIs prolonged negotiations due to complexity and can introduce future political complications if higher payments are triggered but not socially accepted.
  - One-time adjustment nature of macro-linked bonds poses persistent risk: higher payments after 2028, once triggered, would persist even if economic performance deteriorates thereafter. These risks were modeled in stochastic analysis but cannot be perfectly captured.

- Complexity and debt management:
  - External restructuring used progressive amortization, coupon step-ups, and interest capitalization to optimize creditor recovery under constraints.
  - Domestic exchanges used coupon step-downs and ad hoc accounting treatments to minimize upfront fair value losses.
  - Combined design features increased contract complexity, underscoring the need for comprehensive understanding of post-restructuring portfolio risks and rapid strengthening of public debt management capacity.
  - Novel instruments impacted monetary policy due to challenges in offloading them in secondary markets without deep liquidity.

### B. Comparability of Treatment (CoT) and inter-creditor issues
- Past Due Interest (PDI) accumulation:
  - Continued accrual of PDI at contractual rates reduced incentives for quicker negotiation and compounded debtor burden.
  - As of end-2023, the PDI on ISBs stood at USD 1.7 billion compared to the total USD 12.5 billion outstanding principal balance.
  - Large PDI amounts affect CoT considerations by inflating private creditors’ claims and estimated NPV relief, complicating relief allocation and incentivizing competition for scarce FX resources.
- CoT assessment clarity:
  - Lack of absolute clarity on CoT assessment can make ex-ante compliance difficult and slow negotiations.
  - Remedies used: reliance on the OCC Secretariat to test CoT compliance of proposed treatments; alternatives include simplified CoT matrices and greater disclosure of debt treatment terms.
  - Some emerging creditors prefer a rules-based CoT system with clearly defined parameters (vs. traditional constructive ambiguity) to reduce coordination needs; debtor advisors would allocate relief while respecting CoT parameters.

### C. Restructuring process — procedural lessons
- Costs of delay:
  - Delaying restructuring when default was inevitable deepened the crisis; servicing maturing ISBs while reserves fell eroded repayment capacity and output collapsed.
  - Decision to restructure involves weighing cost of default versus cost of continuing unsustainable payments.
- Communication:
  - Unclear announcements on domestic debt restructuring perimeter, parameters, and timeline triggered market volatility and higher domestic yields.
  - Early, proactive engagement with creditors, investors, and the public—including clear rationale—could have reduced uncertainty and preserved confidence.
- IMF support role:
  - IMF roles: (i) set macro framework and debt sustainability targets; (ii) facilitate debtor-creditor engagement and guide creditors.
  - In Sri Lanka, IMF provided “good office” support, high-level engagement to secure financing assurances, explanations of IMF debt policies to new creditors, information sharing facilitation, and bespoke support assessing state-contingent instruments for authorities, advisors, and official creditors.
  - Given SCDI complexity, IMF staff were asked to provide and explain complex assessments in real time.

### D. Debt targets and DSA — calibration and external risk treatment
- External risks and SRDSF:
  - Debt targets reflected higher risks from external shocks; in SRDSF, larger external (residency, currency) debt produces a riskier sustainability assessment.
  - Debt targets implicitly limit external debt to generate a sustainable post-restructuring signal.
  - Continued engagement with external stakeholders is important to clarify that SRDSF includes external debt risks.
- Calibration and mitigation:
  - Debt targets were established based on SRDSF with back-tested models where risk thresholds use past fiscal crisis events (defaults, hyperinflation, extraordinary support).
  - Correlation between fiscal crises and balance of payments crises enables the framework to capture external risks.
  - Baseline macro framework required to lead to external viability via sufficient reserve buffers by program-end, premised on sustainable current account adjustment.
  - External risks were modeled through external debt relief floor during the program and the FX debt service ceiling after the program, reflecting IMF staff assessment and judgment on balance of payments risks and prudence on external adjustment needed for external viability.
  - This procedure mitigated risks from the absence of an off-baseline balance of payments model separate from the fiscal sustainability model, a risk particularly relevant if FX generation capacity is weaker than expected after the program period.

*Source: Box 1 and related discussion in the provided IMF PDF content.*

### 66. Assessing the effectiveness of the debt relief was complicated. Discussions on the Sri Lanka

### Assessing the effectiveness of the debt relief was complicated.

### Assessment complexities and metrics
- Emphasis on single metrics can be misleading:
  - Focusing solely on nominal haircuts overlooks contributions from coupon reductions and maturity extensions, which may combine to generate similar debt relief.
  - NPV is a useful concept for the present value of future cash flows but does not always comprehensively capture impact on debt sustainability and can be measured differently (e.g., NPV of new debt over NPV of old debt vs. NPV of new debt over face value) for different purposes.
  - The NPV concept is highly sensitive to the choice of discount rate: a light NPV relief measured at a 5 percent discount rate would be nearly doubled in size if the discount rate is increased to 10 percent.
  - Cross-event comparisons using NPV can therefore be inconsistent in environments of higher global interest rates.
- Debt targets and macroeconomic/financing assumptions jointly determine the depth of relief:
  - Tight debt targets can appear more demanding for creditors but may be offset by optimistic underlying assumptions, reducing real creditor burden.

### E. The Way Forward — status and immediate priorities
- Current status and recent developments:
  - Restructuring is near-complete and domestic financing conditions have normalized.
  - After the bond exchange, Sri Lanka’s international sovereign spreads have dropped to levels consistent with other post-restructuring cases and its sovereign rating has been upgraded by multiple rating agencies.
  - Treasury bill interest rates have normalized to around 8.5 percent by March 2025.
  - Authorities have begun to issue a substantial share of domestic debt in longer term T-bonds to manage refinancing risks and reduce gross financing needs (GFNs).
  - The domestic debt overhang has been greatly alleviated thanks to the DDOs.
  - A full-blown banking crisis was averted; the recapitalization contingency set aside by the program was eventually not needed; private credit growth resumed supporting the ongoing economic recovery.
- Remaining needs and vulnerabilities:
  - Significant efforts in improving the debt management function are needed to fully restore the functioning Treasury bonds market that Sri Lanka had before the debt crisis.
  - Continued prudent fiscal and macro policies and stronger institutions are required during and after the current EFF arrangement.
  - There is no room for slippage on the fiscal front.
  - Renewed efforts needed to strengthen public debt management given a more complex post-restructuring debt portfolio.
  - New borrowing programs should closely align with program objectives to support fiscal constraints and mitigate debt vulnerabilities.
  - The EFF program monitors the primary fiscal balance target from both above and below-the-line to ensure any government borrowing is captured.
  - Structural reforms: enactment of the PFM and PDM Acts were important milestones; a sensible public investment program and sound procurement process are needed; thorough cost/risk analysis before signing new debt contracts is necessary to preserve sustainability.
  - In the longer term, regaining and sustaining market access is critical for funding development needs as a middle-income country with limited access to official financing.

### Conclusion — causes, program design, and restructuring execution
- Causes of the crisis:
  - Sri Lanka's public debt crisis emerged from a series of policy missteps and external shocks, leading to unsustainable debt levels.
  - By 2019, the country had one of the lowest tax-to-GDP ratios among emerging markets.
  - The Covid-19 pandemic exposed balance of payments vulnerabilities, exacerbated by an overvalued exchange rate.
  - International bonds issued in the 2010s contributed to rapid accumulation of external debt and future repayment pressures.
  - Sri Lanka defaulted for the first time on its external debt obligations in April 2022, prompting sovereign debt restructuring.
- Program design:
  - The EFF-supported adjustment program aimed at restoring medium term external viability and debt sustainability via ambitious macroeconomic policies combining fiscal and external adjustments within a realistic macroeconomic framework.
  - The macro framework was anchored in Sri Lanka’s specific characteristics and international experience, noting likely subdued economic recovery post-default where fiscal consolidation constrains growth, financial sector balance sheets are impaired, and sizeable real effective exchange rate adjustment is needed.
  - Exceptional financing and sovereign debt relief were needed to rebuild FX reserves to safe levels and restore external viability.
  - The program set specific debt sustainability targets calibrated to Sri Lanka's circumstances on external debt service, gross financing needs, and level of public debt to guide restructuring.
- Restructuring execution and creditor landscape:
  - Sri Lanka’s diverse creditor base included international sovereign bond holders, bilateral creditors, multilateral creditors, and domestic financial institutions.
  - A parallel approach was adopted early to secure financing assurances; an official creditor coordinating platform was later established to enable transparent sharing and discussion among bilateral creditors.
  - IMF supported creditor coordination by explaining macro framework and debt sustainability targets.
  - Domestic debt operation (DDO) was implemented first in September 2023, followed by agreements in principle with official external creditors by the first half of 2024, enabling later negotiations with private creditors.
  - Concerns about transparency, comparability of treatments, and introduction of state-contingent debt instruments prolonged the restructuring process.
- Key lessons:
  - Restructuring design must consider domestic debt operations’ impact on financial and social stability.
  - State-contingent instruments complicate comparability and sustainability assessments.
  - Clarity in applying comparability of treatment and improving incentives around past due interest can expedite restructuring.
  - Swift action by authorities, supported by IMF staff and financial advisors, is crucial.
  - Effective communication among stakeholders is essential to address uncertainties around debt targets and restore sustainability.

### Safeguarding sustainability — ongoing policy imperatives
- Ongoing requirements:
  - Safeguarding debt sustainability requires ongoing prudent macroeconomic policies and strengthened public debt management.
  - Financing conditions remain challenging in the near-term; swift normalization is critical to manage refinancing risks and reduce gross financing needs.
  - Aligning new borrowing programs with program objectives is important to mitigate debt vulnerabilities, maintain fiscal discipline, and regain market access.

### Annex I — External creditor coordination (high-level considerations)
- Multilateral creditors and financing:
  - Multilateral creditors have historically enjoyed de facto preferred creditor status due to the public good nature of their financing; they often provide concessional/semi-concessional financing to reduce financing gaps instead of debt relief.
  - Fund-supported programs aim to restore medium term external viability and solve the members’ OP problem to enable repayment of future obligations.
- Coordination mechanisms:
  - Bilateral creditors historically organized around the Paris Club; commercial creditors used the London Club before bonded debt became popular.
  - The G-20 Common Framework brings major bilateral creditors together through an official credit committee and establishes an explicit coordination procedure with commercial creditors.
- IMF’s role and LIOA/LIA policies:
  - IMF explains policies and assesses proposals to restore debt sustainability while keeping arm’s length from negotiations, ensuring timely sharing of macro and financing assumptions and providing DSA modeling support.
  - Lending into Official Arrears (LIOA) policy allows Fund lending into official arrears under specified conditions; since 2024, additional safeguards are required when (i)–(iii) cannot provide a pathway forward.
  - Expectations on assurances differ by creditor: obtaining SCA from Paris Club creditors is generally straightforward; obtaining SCA from non-Paris Club creditors is evolving and can be hindered by capacity constraints.
  - Lending into Arrears (LIA) governs private creditor engagement and requires good faith efforts demonstrated by early engagement, timely information sharing, and creditor input opportunities.

### Annex II — Comparability of Treatment (CoT) considerations
- Purpose and metrics:
  - CoT addresses first mover and free riding problems where multiple creditor groups are present.
  - Paris Club assesses CoT across three metrics: debt service reduction (vs. contractual terms) during the program period, weighted average maturity extension, and NPV relief (against pre-restructuring NPV) measured with a unified discount rate.
  - The matrix enables comparability across differing creditor preferences but is often hard to quantify.
- Contractual safeguards:
  - CoT is reinforced by contractual clauses such as: claw back of debt relief (akin to Most Favored Creditor Clause), condition precedent clauses requiring comparable offers to other foreign creditors, and transparency clauses obliging disclosure of debt treatments.
- IMF stance:
  - IMF does not opine on intercreditor equity issues and CoT matters provided the strategy restores debt sustainability and achieves high private creditor participation.
  - The Fund focuses on ensuring program debt targets are met and defers CoT assessments to creditors, relying on the Paris Club and debtor advisors to assess compliance and consequences of violating CoT.

*Source: IMF Working Paper — Sri Lanka’s Sovereign Debt Restructuring: Lessons from Complex Processes (selected sections).*

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_Source: https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025175-source-pdf.pdf_