$331 sovereign bonds and $952 million in foreign debt are repaid by Sri Lanka in the second quarter

Sri Lanka has repaid 952 million US dollars to foreign creditors in Q2 2025, up from 406.6 million in Q1. Principal repayments to bilateral increased from 17 million to 200 million. The country also repaid the first international sovereign bond of 330 million US dollars. However, outstanding sovereign bonds fell to 10,255 million by end June 2025 and 10,585 million by March 2025. Debt repayments are expected to resume in 2028 or 2029, with market access expected around 2028. The Treasury relies on the central bank for debt repayments.

1. Debt Repayment Overview: Sri Lanka’s foreign debt repayments rose significantly, amounting to 952 million USD in Q2 2025, up from 406.6 million USD in Q1. This includes a crucial repayment of a 330 million USD sovereign bond.
2. Increase in Bilateral Repayments: The principal repayments to bilateral creditors reached 200 million USD in the second quarter, a sharp rise from only 17 million USD in the first quarter.
3. International Sovereign Bond Repayment: A key event in Q2 was the repayment of the first international sovereign bond worth 330 million USD, which was important for covering restructured interest arrears related to defaulted bonds.
4. Outstanding Sovereign Bonds: By the end of June 2025, Sri Lanka’s outstanding sovereign bonds decreased to 10,255 million USD from 10,585 million USD in March 2025, reflecting ongoing repayment efforts.
5. Future Debt Repayment Narratives: There exists a narrative in Sri Lanka suggesting that debt repayments could resume in 2028 or 2029, tied to anticipated market access that would facilitate refinancing maturing debts.
6. Repayment Escalation: Analysts note that repayments for International Sovereign Bonds (ISBs) will increase significantly in 2028 to 544 million USD, compared to lower amounts in the prior years.
7. Concerns Over Treasury Reliance: There are warnings regarding the Treasury’s reliance on the central bank to generate dollars for repayment, emphasizing that insufficient policy actions could hinder this ability.
8. Central Bank Support: In early 2025, the central bank contributed approximately 770 million USD to the government for debt repayments, emphasizing the intertwined nature of government and central bank finances.