Sri Lanka’s debt crisis: preconditions, progress and politics

Sri Lanka defaulted on its external debt for the first time in its history in April 2022. Sri Lankans faced acute shortages of food, fuel and other basic supplies as government responses took hold, including stringent capital controls introduced to preserve dwindling foreign reserves.
Almost a year later, the International Monetary Fund approved a US$3 billion program to boost Sri Lanka's reserves and assist with debt servicing. The road ahead for Sri Lanka is still uncertain: the country needs to strike a deal with creditors, including its biggest bilateral lender, China - and also ensure that a domestic debt restructure deal is settled beforehand.
An event hosted by the Lowy Institute brought together a range of experts to discuss Sri Lanka’s debt crisis. The panel included Indrajit Coomaraswamy, former Governor of the Central Bank of Sri Lanka, Brad Setser, a sovereign debt restructure expert at the Council of Foreign Relations, and Mariza Cooray, Research Fellow and senior economist at the Lowy Institute’s Indo-Pacific Development Centre. The discussion was hosted by Roland Rajah, the Lowy Institute’s Lead Economist and Director of the Indo-Pacific Development Centre.
Dr Indrajit Coomaraswamy was the Governor of the Central Bank of Sri Lanka from 2016 to 2019. He has more than 40 years of experience in policymaking and economic advisory services on both macroeconomic and structural issues at national and intergovernmental levels. A year into his term, Dr Coomaraswamy was recognised as the “Central Bank Governor of the Year for South Asia” for 2019 by Euromoney Institutional Investor Group PLC. He served as the Deputy Director of the Secretary-General's office as well as the Director of Economic Affairs during his tenure at the Commonwealth Secretariat between 1989 and 2008. He holds a PhD in Economics from the University of Sussex and a BA from the University of Cambridge.
Dr Brad Setser is a Senior Fellow at the Council on Foreign Relations in Washington, DC. He served as a senior adviser to the US Trade Representative from 2021 to 2022, where he worked on the resolution of a number of trade disputes. He also served as the Deputy Assistant Secretary for international economic analysis in the US Treasury from 2011 to 2015, where he worked on Europe’s financial crisis, currency policy, financial sanctions, commodity shocks, and Puerto Rico’s debt crisis, and as a director for international economics on the staff of the National Economic Council and the National Security Council. He is the author of Sovereign Wealth and Sovereign Power (CFR, 2008) and the co-author, with Nouriel Roubini, of Bailouts and Bail-ins: Responding to Financial Crises in Emerging Economies (Peterson Institute, 2004). He holds a BA from Harvard University, a masters from Sciences-Po Paris, and an MA and PhD in international relations from Oxford University.
Mariza Cooray is a Research Fellow and senior economist in the Lowy Institute’s Indo-Pacific Development Centre. She has a decade of experience living and working in the Pacific and Indonesia for the Department of Foreign Affairs and Trade, USAID and the Asian Development Bank. She has also worked as a Country Economist for the World Bank in Sri Lanka and began her career in international development in Sri Lanka. Her research interests include public finance, debt management and crisis, poverty and inequality, growth and emerging markets. Mariza has postgraduate qualifications in Mathematics from the Australian National University, a Master of Science in Development Economics from the London School of Economics, where she was an LSE PJD Wiles Scholar, and a BA in Economics from Wilson College in Pennsylvania in the United States. She speaks Sinhalese and Spanish and understands Mandarin.