The governments of Sri Lanka and the United Kingdom have officially entered into a bilateral agreement to restructure a portion of Sri Lanka’s external debt, a deal valued at nearly US $ 90 million. The agreement, described as a “significant milestone” in the nation’s economic recovery efforts, was formalised at the Finance Ministry, on August 22, 2025.
This agreement is a critical component of Sri Lanka’s broader effort to emerge from its most severe economic crisis since gaining independence. In April 2022, the island nation defaulted on its foreign debt for the first time in its history, amid soaring inflation and critical shortages of essential goods.
Securing agreements with bilateral creditors like the United Kingdom is a key prerequisite for the continuation of a nearly US $ 3 billion bailout programme from the International Monetary Fund, which is vital for stabilising the country’s finances.
The total rescheduled debt under the UK agreement consists of US $ 86,068,439.80 and JPY 582,940,944.31. According to the Finance Ministry, this accord is the result of discussions that followed a memorandum of understanding with the Official Creditor Committee (OCC). The OCC, co-chaired by India, Japan and France, was formed to coordinate debt treatment plans among Sri Lanka’s various bilateral lenders.
Sri Lankan government emphasised the deal is a testament to its commitment to finalising the restructuring process swiftly to restore debt sustainability.
The diplomatic notes formalising the agreement were exchanged between Sri Lanka’s Finance, Planning and Economic Development Ministry Secretary Dr. Harshana Suriyapperuma and British High Commissioner to Sri Lanka Andrew Patrick.
Officials expressed that the agreement is expected to further strengthen the “deep and long-standing bilateral relationships” between the two nations.