A coalition of the world's most prominent economists has issued a powerful demand for Sri Lanka's external debt payments to be halted immediately in the wake of the catastrophic Cyclone Ditwah. The group, which includes Nobel laureate Joseph Stiglitz, argues the country's finances are unsustainable following the historic disaster.
The Scale of the Catastrophe
The call follows what Sri Lankan President Anura Kumara Dissanayake described as the "largest and most challenging natural disaster in our history." The cyclone, which struck last month, killed more than 600 people and destroyed hundreds of thousands of homes across the island nation. The environmental devastation has crippled infrastructure, livelihoods, and key economic sectors.
In a stark visual testament to the struggle, villagers in places like Maspanna in Uva province are still labouring to clear thick mud from vehicles and homes. The scale of destruction has fundamentally altered the country's fiscal outlook, absorbing what little fiscal space was created by a previous debt deal.
An Unsustainable Debt Burden
Sri Lanka's $9bn (£6.8bn) national debt was only restructured last year after the government defaulted in 2022. However, even before the cyclone, annual repayments were projected to consume a staggering 25% of government revenues—a level considered exceptionally high by international standards.
The statement from the 120 experts, which also includes renowned economists Jayati Ghosh, Thomas Piketty, and Kate Raworth, warns that the current restructuring package is now wholly inadequate. "This environmental emergency is poised to absorb – and potentially exceed – the extremely limited fiscal space created by the current debt restructuring package," they stated.
Research by Debt Justice highlights the ongoing burden, revealing that after the 2024 restructuring, private creditors were still set to make 40% more profit lending to Sri Lanka than to the US government.
A Call for Urgent Action and Climate Justice
The economists are urging an immediate suspension of sovereign debt payments, followed by a fresh restructuring that reflects the new post-cyclone reality. Their intervention comes as the Sri Lankan government has already sought a $200m emergency loan from the International Monetary Fund (IMF) to manage the immediate crisis, though such funds typically require repayment within three to five years.
The disaster has a clear climate fingerprint. Scientists from World Weather Attribution have found that global heating likely exacerbated the severity of the flooding in Sri Lanka and other affected Asian nations like Indonesia and Malaysia. This adds a dimension of climate injustice to the debt crisis, as a nation contributing minimally to global emissions faces ruinous costs.
The collective demand underscores a growing consensus: without substantial debt relief, Sri Lanka's recovery from Cyclone Ditwah will be impossible, setting a dangerous precedent for other climate-vulnerable nations saddled with debt.
