More than 120 of the world's leading economists have issued a powerful call for Sri Lanka's external debt payments to be halted immediately, following the catastrophic destruction caused by Cyclone Ditwah last month.
The Scale of the Disaster
The cyclone, described by Sri Lanka's President Anura Kumara Dissanayake as the "largest and most challenging natural disaster in our history," killed over 600 people and destroyed hundreds of thousands of homes across the island nation. The environmental devastation has crippled infrastructure, livelihoods, and key economic sectors.
This crisis comes just a year after Sri Lanka concluded a lengthy and complex $9bn (£6.8bn) national debt restructuring, following its 2022 default. Even before the storm, the country's annual debt repayments were projected to consume a staggering 25% of government revenues – a level considered unsustainable by international standards.
A Coalition of Expert Voices
The influential group of signatories includes Nobel laureate Joseph Stiglitz, renowned Indian development economist Jayati Ghosh, inequality expert Thomas Piketty, former Argentinian economy minister Martín Guzmán, and Kate Raworth, author of 'Doughnut Economics'.
In their statement, the experts warn that the fiscal breathing space created by last year's debt deal will be completely erased by the costs of the disaster. "This environmental emergency is poised to absorb – and potentially exceed – the extremely limited fiscal space created by the current debt restructuring package," they stated.
They highlight that Sri Lanka is already taking on more debt from the International Monetary Fund (IMF), including a recent request for a $200m emergency loan to manage the immediate crisis. The group is demanding a fresh, more profound debt restructuring to restore sustainability under these new, dire circumstances.
Profits, Climate and an Unsustainable Burden
Research by the campaign group Debt Justice adds critical context, revealing that even after the 2024 restructuring – where some private creditors took a 'haircut' – lenders are still on course to make 40% more profit from Sri Lanka than from lending to the US government.
Scientists from World Weather Attribution have found that human-induced global heating likely intensified the severe flooding in Sri Lanka and other affected Asian nations like Indonesia and Malaysia. This underscores the growing link between the climate crisis and sovereign debt distress in vulnerable countries.
The economists' intervention places intense pressure on international creditors and institutions to offer Sri Lanka genuine relief, arguing that forcing repayments now would severely hamper recovery from a climate-fuelled catastrophe it did little to cause.
