Putting equal onus on rich global north and developing global south, the Paris Club creditor nations are proposing a 10-year moratorium on Sri Lankan debt and another 15 years of debt restructuring as a formula to resolve the current financial crisis in the Island nation.

While Sri Lanka owes some USD 800 million in structured debt to India, the Modi government has provided emergency aid to the tune of USD four billion to the Island nation to tide over its economic crisis. China, Chinese Exim, and China Development Bank hold billions of US dollar debt with Sri Lanka with the total external debt of the Island nation touching nearly USD 40 billion.

The Sri Lanka government public debt has gone up from 115.3 per of the GDP in end-2021 to 143.7 per cent of the GDP in end June 2022. During 2022, the debt has increased further due to foreign exchange depreciation, deep recession and fiscal deficit with no signs of early revival.

For Sri Lanka to revive, creditors will have to take a huge hair cut with Paris Club clearly hinting that global south should also take the same cut as global north notwithstanding the inequitable distribution of wealth.