Sri Lankas New Bond Rollout Faces Reform Tests
Sri Lanka’s issuance of new performance-linked sovereign bonds under its debt restructuring programme enters a challenging implementation phase as authorities work to meet strict IMF targets.
Treasury Secretary Dr. Harshana Suriyapperuma told investors that fiscal consolidation and structural reforms remain on track, with public debt projected to decline to 95% of GDP by 2032. However, the new Macro-Linked and Governance-Linked Bonds carry performance triggers tied to economic growth and revenue targets, increasing repayment costs if benchmarks are missed.
Although over 92% of external debt has been restructured and credit ratings have improved, risks remain. Revenue mobilisation, politically sensitive electricity tariff reforms, climate-related reconstruction costs and ongoing litigation with a holdout creditor could complicate execution.
The IMF’s upcoming Fifth Review is expected to unlock $350 million in funding, reinforcing investor confidence. Analysts say sustained reform momentum will be crucial to ensure long-term debt sustainability and maintain restored access to international capital markets.
