Sri Lanka Restructures $931 Million Credit Lines with India Amid Economic Recovery Push

Sri Lanka has successfully restructured nearly $931 million in credit lines and buyers’ credit facility agreements with India, in a strategic move aimed at bolstering its fragile economy and strengthening bilateral ties with New Delhi.

The announcement was made by Sri Lanka’s Finance Ministry following the conclusion of high-level talks during Indian Prime Minister Narendra Modi’s visit to Colombo last month. The agreement includes the restructuring of four buyers’ credit facilities and seven Indian credit lines, with the aim of easing Sri Lanka’s debt burden and supporting long-term development initiatives.

“This restructuring marks a key milestone in our recovery efforts and demonstrates the growing depth of our relationship with India,” the ministry said in a statement released Wednesday.

Among the strategic areas targeted under the restructured agreements is the development of an energy hub, a major priority for both nations amid global shifts in energy security and supply chain resilience. The proposed collaboration is expected to draw in private and public investment and serve as a regional energy node in the Indian Ocean.

India has emerged as a critical partner for Sri Lanka as the island nation seeks to recover from its worst financial crisis in decades, which saw foreign reserves plummet, inflation soar, and widespread civil unrest erupt in 2022. Since then, India has extended financial lifelines and policy support, stepping up as a key ally in South Asia.

The restructuring is also viewed as a diplomatic signal of New Delhi’s commitment to regional stability and economic interdependence, especially in the face of growing influence from China and other external powers in the region.

Economic analysts say the move could help Sri Lanka meet key IMF targets, as the country continues to restructure its overall debt portfolio while unlocking additional international funding.

“This is more than a financial adjustment it’s a geopolitical statement,” said Dr. Meera Jayasinghe, an economist based in Colombo. “India is making it clear it intends to lead in the region’s post-pandemic recovery.”

The finance ministry added that further agreements with international creditors are in the pipeline as part of Sri Lanka’s broader debt sustainability strategy.