COLOMBO: Sri Lanka’s new government said Tuesday it would “review” a $12.5 billion sovereign bond debt restructure deal announced last month as part of efforts to repair the nation’s ruined finances.

Restructuring the debt is a cornerstone of the International Monetary Fund rescue plan Sri Lanka agreed to last year after an unprecedented economic crisis. Former president Ranil Wickremesinghe had unveiled an agreement with international bondholders, the largest component of the government’s foreign debt, just days before he lost office in an election last month.

But new foreign minister Vijitha Herath told reporters that the new administration was still weighing whether to proceed with it. “We will review the debt restructure agreement the previous government announced,” Herath said. Herath said an IMF team would visit Colombo on Wednesday to meet members of new leftist President Anura Kumara Dissanayake’s team.

The IMF delegation’s meeting was a “courtesy call” and substantive negotiations will commence later this month in the United States, he added. Sri Lanka defaulted on its $46 billion foreign debt in April 2022 after the country ran out of foreign exchange, sparking months of acute food, fuel and medicine shortages. Street protests forced then-president Gotabaya Rajapaksa to flee the country and tender his resignation from abroad.

His successor Wickremesinghe secured the IMF bailout that included tough and unpopular austerity measures that saw him resoundingly lose last month’s presidential vote.

Dissanayake, an avowed Marxist, had criticized Wickremesinghe during the campaign for not securing better deals with international creditors and vowed to renegotiate if elected.

Last month’s tentative deal had seen bondholders agree to a 27-percent haircut on their loans and reductions in overdue interest payments accumulated since the April 2022 default. The deal would need approval by parliament, but Dissanayake last week dissolved the legislature and called a snap election for November. — AFP