Minister Jayantha: “Too much interest” in the cost of debt restructure delay

Fact Check

Minister of Labour and Deputy Minister of Economic Development, Prof. Anil Jayantha claimed that (1) there was a significant delay in restructuring process, and that (2) due to this delay, Sri L anka had to pay an additional interest cost of USD 1.7 billion.

To verify the claim, FactCheck.lk consulted Ministry of Finance press releases on International Sovereign Bonds (ISB) debt restructuring, IMF staff-level agreement (IMFSLA) and the Investor Presentation by Central Bank of Sri Lanka (IPCBSL) in September 2022.

1. What was the ‘delay period’ to restructure debt?

According to the IMFSLA and the IPCBSL, Sri Lanka was expected to complete its debt restructuring by June 2023. Sri Lanka announced its completion of external debt exchange on December 20, 2024, restructuring USD 12,277 million in ISBs.

Under the ISB debt restructuring agreement, while the process was finalised in December 2024, the terms were applied retroactively, making the restructuring effective from March 31, 2024. Therefore, the nine-month period from June 2023 to March 2024 (inc.) can be defined as the delay period, in terms of accruing past due interest.

2. How much was the additional interest cost incurred due to the delay?

As a result of the suspension of external debt payments in April 2022, Sri Lanka had accrued USD 1,851 million in interest on its old debt of USD 12,277 million by the end of March 2024. This accrued interest is referred to as Past Due Interest (PDI).

The exact amount cited by the minister—USD 1.7 billion—represents the adjusted PDI of USD 1,648 million after an 11% debt relief on PDI under the new agreement.

Had Sri Lanka completed its restructuring by June 2023 as initially expected and done so with same levels of debt relief, the PDI would have only been USD 1,096 million, instead of the final PDI payment of USD 1,648 million. Therefore, the PDI accrued due to the ‘delay period’ is only USD 552 million.

The minister’s overall argument—that there was a delay which led to additional accrual of past due interest—is correct. However, he incorrectly states the final PDI value as the PDI that was due to the delay in restructuring. Whereas the increase in PDI due to the ‘delay period’ is only about one third of the number stated by the minister.

Therefore, we classify the minister’s statement as PARTLY TRUE.

*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment.

Exhibit 1: Calculation of additional interest cost incurred due to the delay (Figures in USD million)