Jul 02, Kathmandu- President Ranil Wickremesinghe is going to say that Sri Lanka will save five billion dollars after the restructuring of its bilateral debt. According to him, much of the debt is owed to China, which will be repaid through reduced interest rates and a longer repayment schedule.

The island nation of Sri Lanka defaulted on its foreign debt in 2022 during an unprecedented economic crisis that led to months of food, fuel and medicine shortages.

President Ranil Wickremesinghe said last week's agreement secured a moratorium on loan repayments until 2028, extended the loan term by eight years and cut interest rates to an average of 2.1 percent.

President Wickremesinghe said the bilateral lenders, led by China, the government's largest single creditor, had not agreed to cut their debt, but the terms agreed would help Sri Lanka.

Sri Lanka will save five billion dollars as a result of the agreed restructuring measures, Wickremesinghe told parliament in his first address to the Legislature on the debt settlement.

According to him, some of the loans taken by Sri Lanka from China are at high interest rates, the loan from the second largest lender, Japan, has increased by about eight percent, which is less than one percent. Sri Lanka entered into separate agreements with China and the remaining bilateral creditors including Japan, France and India.

According to Treasury data from March, 28.5 percent of Sri Lanka's foreign debt of $37 billion is owed to bilateral lenders. This does not include external loans guaranteed by the government. Of the $10.58 billion loan taken by Sri Lanka from other countries, China's share is $4.66 billion.

Wickramasinghe expects the restructuring of external commercial loans of 14.7 billion dollars, including 2.18 billion dollars from the China Development Bank, to be completed soon.

Sri Lanka's 2022 crisis sparked months of public protests that ultimately forced the then president, Gotabaya Rajapaksa, to resign after angry mobs stormed his compound.

Wickramasingde said the country was reeling from an economic recession when he took office and hoped the $2.9 billion International Monetary Fund bailout he received last year would be the island's last.