According to 182 economists and development experts, powerful hedge funds and investment companies are preventing vital help from reaching crisis-hit Sri Lanka.
The group stated that private sector creditors were preventing a debt relief deal for the island.
Last year the Sri Lanka defaulted on $51 billion in debt. The sovereign default left civilians without food, fuel and critical medication.
In a statement released to the Guardian on Sunday, the group of economists and development experts stated that "extensive debt cancellation was needed to give the economy a chance of recovery."
The group also emphasized that "all lenders - bilateral, multilateral, and private - must share the burden of restructuring, with assurance of additional financing in the near term."
Almost forty percent of Sri Lanka's external debt stock is owned by private creditors. This debt stock is primarily in the form of international sovereign bonds. The high interest rates levied on these bonds means that the private creditors recieve more than 50% of external debt payments.
According to the group of economists and development experts "lenders charged a premium to lend to Sri Lanka to cover their risks which accrued them massive profits and contributed to Sri Lanka's first ever default in April 2022." They continued, "lenders who benefited from higher returns because of the 'risk premium' must be willing to take the consequences of that risk."
Sri Lanka is expected to recieve a loan from the International Monetary Fund (IMF) once the IMF is confident Sri Lanka's debts are sustainable. However, the 182 economists and development experts expressed concern that the hardline stance adopted by private creditors will have a negative impact on the deal Sri Lanka recieves.
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