## Sri Lanka’s Sovereign Debt Restructuring: Lessons from Complex Processes

_IMF Working Papers, September 23, 2025_

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## Bibliographic details
- Authors: Peter Breuer, Sandesh Dhungana, Mike Li
- Published: September 23, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229024211.001

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### Overview and context
- Publication date: September 23, 2025
- By: Peter Breuer, Sandesh Dhungana, Mike Li
- Series: Working Paper No. 2025/175; Issue: 175; Volume: 2025; Pages: 46
- DOI: https://doi.org/10.5089/9798229024211.001
- Stock No: WPIEA2025175
- ISBN: 9798229024211
- ISSN: 1018-5941
- Citation provided in source: Peter Breuer, Sandesh Dhungana, and Mike Li. "Sri Lanka’s Sovereign Debt Restructuring: Lessons from Complex Processes", IMF Working Papers 2025, 175 (2025), accessed 8/28/2026, https://doi.org/10.5089/9798229024211.001

### Key findings and analysis
- Restructuring complexity
  - Sri Lanka’s debt restructuring is distinguished by its complexity due to a particularly diverse creditor landscape and novel instruments issued in the restructuring.
  - The majority of official debt was held by non-traditional creditors outside of the Paris Club.
  - Domestic borrowing played an important role in Sri Lanka’s overall debt.
- Eligibility and coordination constraints
  - Sri Lanka was not eligible for the G20 Common Framework for Debt Treatments and therefore had to navigate challenges of a diverse creditor landscape requiring complex coordination across many stakeholders.
- Creditor preferences and instruments
  - Commercial creditors were particularly interested in new and complex instruments that would:
    - share up- and downsides to the macroeconomic framework, and
    - offer additional debt relief for implementing governance reforms.
- IMF analytical approach
  - For the first time, the IMF applied fully the newly developed Sovereign Risk and Debt Sustainability Framework to assess debt sustainability.
- Macroeconomic backdrop
  - The restructuring took place against the background of a very deep fiscal and balance of payments crisis that required sweeping policy solutions.
  - The crisis and restructuring occurred in the context of a complex IMF-supported reform program.
- Scope of the paper
  - Reviews root causes of Sri Lanka’s debt problem, deliberation of its solution, and the designs, negotiations, and outcomes of the restructuring processes.

### Policy implications and lessons
- Restructuring strategies and design
  - Lessons from Sri Lanka’s experience can inform restructuring strategies and instrument design when confronted with:
    - a highly diverse creditor base,
    - significant domestic debt exposure, and
    - creditor preferences for state-contingent and governance-linked instruments.
- Role of the IMF
  - The IMF’s role in facilitating debt-creditor engagement is highlighted as a key element that can inform future restructurings.
- Analytical tools
  - Full application of the Sovereign Risk and Debt Sustainability Framework illustrates the value of advanced analytical tools in assessing debt sustainability under complex creditor structures and macroeconomic stress.

### Subjects and keywords (from source)
- Subjects: Asset and liability management, Debt Relief, Debt service, Debt sustainability, External debt, Public debt
- Keywords: BOP financing gap, Debt relief, Debt service, Debt sustainability, debt-creditor engagement, Global, IMF's role, restructuring strategy, Sovereign Debt, Sovereign Debt Restructurings, Sovereign Defaults, Sri Lanka, Sri Lanka development bond, Sri Lanka's Debt problem, Sri Lanka's Debt restructuring

*Source: IMF Working Paper "Sri Lanka’s Sovereign Debt Restructuring: Lessons from Complex Processes" (Working Paper No. 2025/175, September 23, 2025).*

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_Source: https://www.imf.org/en/publications/wp/issues/2025/09/05/sri-lankas-sovereign-debt-restructuring-lessons-from-complex-processes-570102_