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December 3, 2023 @ 7:30 am - 11:30 pm


Recent developments highlight Sri Lanka’s successful negotiation of a preliminary debt restructuring deal with India and the Paris Club Group, signaling a potential revival of its IMF loan programme. This agreement is pivotal for Sri Lanka, which faced a debt default in 2022, impacting its economic stability. Understanding the context, debt scenario, and collaborative efforts with countries like India becomes crucial in comprehending Sri Lanka’s path to recovery.

Debt Scenario in Sri Lanka:

Magnitude of Debt:

Sri Lanka grapples with a foreign debt of approximately USD 46 billion.

Chinese lenders hold the largest share, with Japan, India, and commercial bondholders also significant creditors.

Default in 2022:

Sri Lanka defaulted in May 2022, becoming the first Asia-Pacific country to default in two decades.

Factors include domestic economic mismanagement and global challenges post-COVID and Ukraine’s invasion.

Economic Consequences:

Foreign currency reserves decline led to shortages, affecting imported essentials and triggering mass protests.

Living standards plummeted, emphasizing the urgency for a comprehensive debt restructuring.

Role of the Paris Club:


Origin and Objective:

Formed in 1956, the Paris Club comprises western creditor countries aiming to address payment difficulties faced by debtor nations.

Objective is to find sustainable debt-relief solutions for countries struggling to repay bilateral loans.


Comprises 22 members, including economically developed nations like the United States, Japan, Germany, and others.

Members of the Organisation for Economic Co-operation and Development (OECD).

Debt Agreements:

Involved in 478 agreements with 102 debtor countries.

Debt treated under Paris Club agreements amounts to USD 614 billion since 1956.

India’s Involvement in Debt Management and Economic Development:

Debt Restructuring:

India collaborates with the IMF and creditors to facilitate Sri Lanka’s debt restructuring.

India’s support is pivotal for Sri Lanka’s reintegration into the global economic framework.

Connectivity and Renewable Energy:

Joint vision emphasizes comprehensive connectivity and renewable energy.

Indian companies contribute to renewable energy projects in Sri Lanka, fostering collaboration in the energy sector.

Economic and Technology Cooperation Agreement (ETCA):

Exploring the possibility of an ETCA to integrate economies and foster development.

Reflects a commitment to strengthen economic ties and promote shared growth.

Petroleum Pipeline Agreement:

Agreement on a multi-product petroleum pipeline from southern India to Sri Lanka.

Aims to ensure an affordable and reliable energy supply, recognizing energy’s critical role in economic development.

Adoption of India’s UPI:

Sri Lanka adopts India’s UPI service, enhancing fintech connectivity.

Settlements in rupees contribute to economic recovery, demonstrating tangible steps for growth.


Sri Lanka’s debt restructuring agreement with India and the Paris Club marks a significant step toward economic recovery. The collaboration signifies the importance of international partnerships and strategic alliances in addressing complex economic challenges.

India’s multifaceted role, from debt restructuring support to joint ventures in renewable energy, underlines the commitment to fostering sustainable development.

As Sri Lanka navigates its path to economic stability, continued collaboration with global partners, especially India, becomes pivotal for long-term growth and resilience.

Mains Question:

  1. Examine the debt scenario in Sri Lanka, emphasizing the causes and consequences of its default in 2022. Discuss the role played by the Paris Club and India in the debt restructuring process. Analyze the collaborative efforts in areas such as connectivity, renewable energy, and economic cooperation, highlighting their significance in Sri Lanka’s path to economic recovery. (150 words) 10M


December 3, 2023
7:30 am - 11:30 pm
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