Sri Lanka Seals $5.8 Billion Debt Deal with Official Creditor Committee Led by India, Japan, and France


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Sri Lanka Seals $5.8 Billion Debt Deal with Official Creditor Committee Led by India, Japan, and France Blog Image

What’s in today’s article?

  • Why in News?
  • What is Official Creditor Committee (OCC) in Paris?
  • What is Paris Club?
  • Recent Deal with Sri Lanka
  • Significance of this agreement for Sri Lanka
  • Role of India

Why in News?

Sri Lanka reached a final restructuring agreement for $5.8 billion with its bilateral lenders’ Official Creditor Committee headed by India, Japan, and France.

What is Official Creditor Committee (OCC) in Paris?

  • Background
    • OCC is a group formed to represent the collective interests of creditors during the debt restructuring or bankruptcy process of a debtor, typically a corporation or sovereign entity. 
    • The OCC is often appointed in formal insolvency proceedings, such as those under the jurisdiction of bankruptcy courts, to ensure that the creditors' interests are protected and that the restructuring plan is fair and equitable.
    • This term OCC is used more generally to describe any ad-hoc committee formed to represent official creditors during debt restructuring negotiations. 
    • It does not refer to a single, permanent organization but rather to various committees that might be formed for specific cases.
  • About
    • The OCC that has signed a deal with Sri Lanka recently refers to a specific ad-hoc group of official bilateral creditors, often formed to address the debt restructuring needs of a particular country.
    • It was formed in May 2023 with the aim of simplifying Sri Lanka’s debt negotiations after the country defaulted on its external debt, in the wake of an unprecedented financial crash in 2022.
  • Members
    • The OCC is a platform comprising 17 countries including India and members of the Paris Club such as Japan, that have extended loans to Sri Lanka.
  • Headquarters
    • While not a permanent entity with a fixed headquarters, meetings for this OCC would typically be held in Paris, especially if coordinated with the Paris Club, which has its secretariat there.
  • Role and Function
    • The OCC's primary role is to negotiate and coordinate the restructuring of Sri Lanka’s external debt, ensuring a fair and sustainable resolution for the country's debt crisis.

What is Paris Club?

  • About - It is an informal group of official creditors (primarily major industrialized countries) that coordinates solutions for debtor countries facing payment difficulties. 
  • Headquarters - Paris, France.
  • Members - The Paris Club consists of 22 permanent member countries, which are primarily from Europe, North America, and Asia.

Recent Deal with Sri Lanka


  • Background - Financial crisis in Sri Lanka
    • Sri Lanka in mid-April of 2022 declared its first ever sovereign default since gaining independence from Britain in 1948.
    • The International Monetary Fund had made external debt restructuring conditional to the USD 2.9 billion bailout.
  • Final restructuring agreement
    • Sri Lanka reached a final restructuring agreement for $5.8 billion of debt with its bilateral lenders’ Official Creditor Committee in Paris.
    • This agreement grants significant debt relief, allowing Sri Lanka to allocate funds to essential public services & secure concessional financing for development needs.
  • Sri Lanka’s bilateral unpaid debt
    • Sri Lanka’s total bilateral unpaid debt amounts to 10, 588 million dollars.
Sri Lankas total bilateral debt
  • China pact
    • China, Sri Lanka’s largest bilateral lender, opted to stay out of the platform, but attended the discussions as an observer. 
    • Colombo has been negotiating its debt treatment with Beijing bilaterally and has clinched a deal.

Significance of this agreement for Sri Lanka

  • This agreement means that half of the government’s external debt by creditor countries and organisations has been restructured. 
    • Debt restructuring is a process used by companies, sovereign nations, or individuals facing financial distress to reorganize their outstanding debt obligations to make them more manageable and sustainable. 
    • This can involve a range of strategies aimed at reducing the burden of debt and improving the debtor's ability to meet future obligations.
  • This milestone demonstrates the strong progress made by Sri Lanka in stabilizing its economy and moving towards reform and growth.

Role of India

  • As one of the Co-Chairs of the OCC, along with France and Japan, India has been steadfast in its commitment to the stabilization, recovery and growth of the Sri Lankan economy. 
  • This was also demonstrated by India’s unprecedented financial support of USD 4 billion to Sri Lanka. 
  • India was also the first creditor nation to convey financing assurances to IMF which paved the way for Sri Lanka to secure the IMF programme.

Q.1. What is financial crisis of Sri Lanka? 

The financial crisis in Sri Lanka refers to a period of severe economic turmoil marked by a combination of high external debt, dwindling foreign exchange reserves, and challenges in meeting debt obligations, prompting the need for restructuring and economic recovery measures.

Q.2. What is International Monetary Fund (IMF)?

The International Monetary Fund (IMF) is an international organization established to promote global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. It provides financial assistance, policy advice, and technical assistance to member countries facing economic challenges.

Source: Sri Lanka seals debt deal with Official Creditor Committee after financial crisis | MEA | Paris Club | Hindustan Times