Japan, India, and France Create Common Platform for Sri Lanka Creditors

Facts

• Japan, India, and France on Thursday announced a common platform for bilateral creditors to coordinate restructuring Sri Lanka's debt. The three nations hope the move will be a template for restructuring other middle-income economies in the future.¹
• China, Sri Lanka's biggest bilateral creditor, has notably not decided on whether it will join the common platform, which was unveiled in Washington amid International Monetary Fund (IMF) and World Bank meetings.²
• Sri Lanka currently owes $7.1B to bilateral creditors, including $3B to China, $2.4B to the Paris Club, and $1.6B to India. It also needs to renegotiate $12B in Eurobonds owed to overseas private creditors and pay back $2.7B to other commercial lenders.³
• Sri Lankan Pres. Ranil Wickremesinghe said his country is committed to engaging with all creditors, adding that he would present Parliament with the $2.9B IMF bailout agreement, gain approval, and bring in legislation to ensure its implementation.⁴
• Japan, who leads the G7 this year, is spearheading the initiative, with Japanese Finance Minister Shunichi Suzuki calling it a 'historical outcome,' also expressing hope that China would join the effort.¹
• According to the IMF, from which Sri Lanka has already received $330M of its nearly $3B bailout, the South Asian country's debt was at 128% of its gross domestic product as of end-2022, which is 'unsustainable.'²

Sources: ¹Al Jazeera, ²Archive, ³Reuters and ⁴Telegraph india.

Narratives

• Pro-establishment narrative, as provided by Eurasia review. Western states and banks must coordinate Sri Lanka's bailout if they know what's good for them. Not only will it prevent Sri Lanka from tilting closer to China, but it will help ordinary Sri Lankans as they face complete economic collapse and record costs of living. Setting Sri Lanka on a path of stability will also help it regain its political institutions, as the South Asian nation hasn't been able to afford to hold elections without financial support.
• Establishment-critical narrative, as provided by Mr online. Sri Lanka has been in a debt trap — one of the primary reasons for its recent economic collapse — but it isn't China that owns them. As of 2021, 81% of Sri Lanka's debt was held by European or US financial institutions, such as BlackRock, UBS, JP Morgan, and HSBC. The West has crushed the South Asian island nation through overwhelming debt for years, and now they're taking on yet another billion-dollar deal to further burden the Sri Lankan people.