This was in response to the devastating impacts of Cyclone Ditwah, which exacerbated the country’s fiscal pressures following its 2024 debt deals.The most prominently named signatories include:
- Joseph Stiglitz (Nobel Prize-winning economist)
- Jayati Ghosh (development economist, University of Massachusetts Amherst)
- Thomas Piketty (inequality expert, author of Capital in the Twenty-First Century)
- Martín Guzmán (former Economy Minister of Argentina)
- Kate Raworth (author of Doughnut Economics)
The statement, supported by groups like Debt Justice, argues that pre-cyclone debt service levels were already unsustainable (around 25% of government revenues) and that the disaster necessitates deeper relief to prioritize reconstruction and humanitarian needs over repayments.
- Catastrophic impact of the cyclone — The disaster killed over 600 people, destroyed hundreds of thousands of homes, and caused widespread environmental and infrastructure devastation—described by President Anura Kumara Dissanayake as the country’s worst natural disaster—exacerbating economic vulnerabilities and increasing reconstruction needs dramatically.
- Need for immediate suspension of debt payments — Creditors should halt repayments to free up resources for urgent humanitarian aid, recovery, and rebuilding efforts.
- Call for a new round of debt restructuring — The 2024 restructuring is now insufficient; a fresh, deeper deal is required to reduce repayments to manageable levels and restore fiscal space.
- Critique of creditor outcomes and alternatives — Despite the 2024 deal (which included haircuts for some investors), research by Debt Justice indicates private creditors remain positioned to earn 40% higher profits lending to Sri Lanka than to safer borrowers like the US government. The economists argue against relying on short-term repayable emergency loans (e.g., the requested $200 million IMF facility, repayable in 3-5 years), emphasizing instead priority for humanitarian and climate-resilient recovery over strict adherence to prior debt obligations.
Sri Lanka completed a major debt restructuring process in 2024, following its 2022 sovereign default. This involved agreements with bilateral creditors (including China, India, and Japan), private bondholders (achieving ~98% participation in bond exchanges), and domestic debt optimization. The deals included:
- Debt forgiveness of around $3 billion
- Restructuring of $25 billion in external debt with extended maturities (up to 20+ years)
- Lower interest rates
- Innovative instruments like macro-linked and governance-linked bonds
This reduced near-term debt service burdens significantly and helped restore some debt sustainability under the IMF’s Extended Fund Facility program. By mid-2025, the IMF noted the restructuring was nearing full completion, with economic growth resuming (around 4-5% projected for 2025) and reserves building and recent calls for further restructuring.
