Global academics call for Sri Lanka to default again after Ditwah
Big names in the academic world and some macro-economists have called for Sri Lanka to default again after hurricane Ditwah hit the island, saying there is a ‘climate shock’.
“The existing restructuring – modest, conditional and tied to uncertain macroeconomic outcomes – is inadequate to protect the vulnerable majority from recurrent climate and external shocks,” the academics said in a statement.
“Therefore, we call for immediate suspension of Sri Lanka’s external sovereign debt payments, and a new restructuring that restores debt sustainability under the new circumstances.”
Among the signatories is Joseph Stiglitz, one of several top advocates of inflationary policies at the turn of the century, which critics said turned central banks from agencies that provided stability (inflation fighters so-called) into reflators (inflation firing bubble blowers).
In 2001, he called for the International Monetary Fund to print SDRs to boost aggregate demand.
“The problems of insufficient global aggregate demand were on the minds of John Maynard Keynes and others who conceived and founded the IMF,” he claimed in an op-end in 2001 (Lessons from the Global Slowdown).
“There is a framework for enhancing aggregate purchasing power, through the creation of SDR’s.”
In the event, the Federal Reserve printed enough money and triggered the Housing Bubble a few years later.
Another signatory is Stephanie Kelton, Stony Brook University, USA, who is the author of The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy.
Statement by leading economists and academics on Sri Lanka’s Climate Crisis and IMF Restructuring Deal
Sri Lanka’s 17th IMF sovereign debt restructuring agreement is executed under the 48-month IMF Extended Fund Facility (EFF) and provides limited debt service relief. It therefore failed to provide a sustainable solution to Sri Lanka’s debt crisis and left Sri Lanka extremely vulnerable to external shocks – particularly climate-induced disasters. Those shocks have now hit with the catastrophic aftermath of Cyclone Ditwah – marked by widespread flooding, deadly landslides, displacement of more than 1.4 million people, and nearly 800 individuals either dead or missing. The concern over the country’s future deepens.
Under the current IMF-supported arrangement, creditors agreed to reduce the size of Sri Lanks debt payments, measured in net present value terms, by 17%.
This left Sri Lanka with government external debt payments of around 25% of revenue, one of the highest rates in the world. According to IMF staff, under the IMF’s own models, Sri Lanka has a 50% chance of defaulting and/or needing another debt restructuring, even after debt relief.
The IMF publicly said that “debt risks will remain high for many years”. Sri Lanka is now confronting a severe economic shock triggered by the recent cyclone, extensive flooding and landslides, which has inflicted extensive damage to infrastructure, livelihoods, and key sectors of the economy. This environmental emergency is poised to absorb – and potentially exceed – the extremely limited fiscal space created by the current debt restructuring package.
Additional external debt is already being taken on from the IMF, and more lending to deal with the impacts of the disaster is likely.
Given Sri Lanka’s vulnerabiity to climate shocks, the scale of destruction underscores how insufficient the present debt deal is in safeguarding economic stability. The country’s already fragile socio-economic landscape heightens the risks: diminished revenues, rising reconstruction costs, and increased import needs could quickly undermine projected gains from the restructuring.
In this context, the nation remains acutely exposed to further external shocks, whether climatic or economic, highlighting the need for a more comprehensive, resilience-oriented debt solution.
The IMF itself has acknowledged that Sri Lanka’s path to “debt sustainability remains knifeedged,” with the country only narrowly meeting targets while social-spending benchmarks were missed.
In light of the current climate catastrophe that has hit Sri Lanka, we wish to highlight the following points:
• The existing restructuring – modest, conditional and tied to uncertain macroeconomic outcomes – is inadequate to protect the vulnerable majority from recurrent climate and external shocks.
• By prioritising debt service continuity over deep debt relief, the IMF programme perpetuates structural exposure of Sri Lanka’s economy and population to future disasters.
December 2025• Continuing to impose debt repayment obligations under these conditions fails to consider Sri Lanka’s capacity to service debt, which should instead be based on its foreign exchange (forex) earnings.
• Current onerous debt servicing undermines efforts to rebuild lives, restore agriculture, infrastructure, and provide social protection.
Therefore, we call for immediate suspension of Sri Lanka’s external sovereign debt payments, and a new restructuring that restores debt sustainability under the new circumstances.
We propose the adoption of a genuinely sustainable framework that:
• Recognises climate-driven disasters as systemic, not exceptional, shocks.
• Provides significant debt cancellation – with no punitive conditions – to free up fiscal
space for disaster recovery, social protection, reconstruction and development.
• Prioritises human welfare, environmental protection, and long-term viability over
financial obligations to external creditors.
Only a fundamental rethinking of the global debt regime – one based on justice and sustainability – will offer Sri Lanka a realistic chance to recover from the climate impacts and build an equitable future for all.
Coordinated by: Professor Jayati Ghosh; Debt Justice, UK; Institute of Political Economy, Sri Lanka.
“The existing restructuring – modest, conditional and tied to uncertain macroeconomic outcomes – is inadequate to protect the vulnerable majority from recurrent climate and external shocks,” the academics said in a statement.
“Therefore, we call for immediate suspension of Sri Lanka’s external sovereign debt payments, and a new restructuring that restores debt sustainability under the new circumstances.”
Among the signatories is Joseph Stiglitz, one of several top advocates of inflationary policies at the turn of the century, which critics said turned central banks from agencies that provided stability (inflation fighters so-called) into reflators (inflation firing bubble blowers).
In 2001, he called for the International Monetary Fund to print SDRs to boost aggregate demand.
“The problems of insufficient global aggregate demand were on the minds of John Maynard Keynes and others who conceived and founded the IMF,” he claimed in an op-end in 2001 (Lessons from the Global Slowdown).
“There is a framework for enhancing aggregate purchasing power, through the creation of SDR’s.”
In the event, the Federal Reserve printed enough money and triggered the Housing Bubble a few years later.
Another signatory is Stephanie Kelton, Stony Brook University, USA, who is the author of The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy.
Statement by leading economists and academics on Sri Lanka’s Climate Crisis and IMF Restructuring Deal
Sri Lanka’s 17th IMF sovereign debt restructuring agreement is executed under the 48-month IMF Extended Fund Facility (EFF) and provides limited debt service relief. It therefore failed to provide a sustainable solution to Sri Lanka’s debt crisis and left Sri Lanka extremely vulnerable to external shocks – particularly climate-induced disasters. Those shocks have now hit with the catastrophic aftermath of Cyclone Ditwah – marked by widespread flooding, deadly landslides, displacement of more than 1.4 million people, and nearly 800 individuals either dead or missing. The concern over the country’s future deepens.
Under the current IMF-supported arrangement, creditors agreed to reduce the size of Sri Lanks debt payments, measured in net present value terms, by 17%.
This left Sri Lanka with government external debt payments of around 25% of revenue, one of the highest rates in the world. According to IMF staff, under the IMF’s own models, Sri Lanka has a 50% chance of defaulting and/or needing another debt restructuring, even after debt relief.
The IMF publicly said that “debt risks will remain high for many years”. Sri Lanka is now confronting a severe economic shock triggered by the recent cyclone, extensive flooding and landslides, which has inflicted extensive damage to infrastructure, livelihoods, and key sectors of the economy. This environmental emergency is poised to absorb – and potentially exceed – the extremely limited fiscal space created by the current debt restructuring package.
Additional external debt is already being taken on from the IMF, and more lending to deal with the impacts of the disaster is likely.
Given Sri Lanka’s vulnerabiity to climate shocks, the scale of destruction underscores how insufficient the present debt deal is in safeguarding economic stability. The country’s already fragile socio-economic landscape heightens the risks: diminished revenues, rising reconstruction costs, and increased import needs could quickly undermine projected gains from the restructuring.
In this context, the nation remains acutely exposed to further external shocks, whether climatic or economic, highlighting the need for a more comprehensive, resilience-oriented debt solution.
The IMF itself has acknowledged that Sri Lanka’s path to “debt sustainability remains knifeedged,” with the country only narrowly meeting targets while social-spending benchmarks were missed.
In light of the current climate catastrophe that has hit Sri Lanka, we wish to highlight the following points:
• The existing restructuring – modest, conditional and tied to uncertain macroeconomic outcomes – is inadequate to protect the vulnerable majority from recurrent climate and external shocks.
• By prioritising debt service continuity over deep debt relief, the IMF programme perpetuates structural exposure of Sri Lanka’s economy and population to future disasters.
December 2025• Continuing to impose debt repayment obligations under these conditions fails to consider Sri Lanka’s capacity to service debt, which should instead be based on its foreign exchange (forex) earnings.
• Current onerous debt servicing undermines efforts to rebuild lives, restore agriculture, infrastructure, and provide social protection.
Therefore, we call for immediate suspension of Sri Lanka’s external sovereign debt payments, and a new restructuring that restores debt sustainability under the new circumstances.
We propose the adoption of a genuinely sustainable framework that:
• Recognises climate-driven disasters as systemic, not exceptional, shocks.
• Provides significant debt cancellation – with no punitive conditions – to free up fiscal
space for disaster recovery, social protection, reconstruction and development.
• Prioritises human welfare, environmental protection, and long-term viability over
financial obligations to external creditors.
Only a fundamental rethinking of the global debt regime – one based on justice and sustainability – will offer Sri Lanka a realistic chance to recover from the climate impacts and build an equitable future for all.
Coordinated by: Professor Jayati Ghosh; Debt Justice, UK; Institute of Political Economy, Sri Lanka.
SIGNATORIES
1. Professor Jayati Ghosh, University of Massachusetts-Amherst, USA
2. Professor Joseph Stiglitz, Columbia University, USA
3. Professor Thomas Piketty, Science Po/Paris School of Economics, France
4. Professor Yanis Varoufakis, University of Athens, Greece
5. Professor Martin Guzman, Columbia University, USA
6. Professor C P Chandrasekhar, University of Massachusetts-Amherst, USA
7. Professor Stephanie Kelton, Stony Brook University, USA
8. Professor Jason Hickel, ICTA-University of Barcelona, Spain/LSE, United Kingdom
9. Professor Guy Standing, SOAS, University of London, U.K.
10. Professor Fadhel Kaboub, Global Institute for Sustainable Prosperity, USA
11. Professor Gary Dymski, Leeds University, United Kingdom
12. Professor Sudip Chaudhuri, India Institute of Management – Calcutta, India
13. Professor Kevin Gallagher, Boston University, USA
14. Professor Radhika Balakrishnan, Rutgers University, USA
15. Professor Gerald Epstein, University of Massachusetts, USA
16. Professor Utsa Patnaik, Jawaharlal Nehru University, India.
17. Professor Mariana Reis Maria, Universidade Estadual de Campinas, Brazil
18. Professor Irene van Staveren, Erasmus University – Rotterdam, The Netherlands
19. Professor Juan Carolos Moreno-Brid, UNAM-Mexico
20. Professor Surajit Mazumdar, Jawaharlal Nehru University, India
21. Professor Howard Nicholas, International School of Business – Ho Chi Min, Vietnam
