Sri Lanka expects to attract about $5 billion in foreign funds in the next two years once it is able to finalise the restructuring of its overseas debt, the country's foreign minister said on Monday.

The nation defaulted on its overseas debt in May 2022, after a severe shortage of foreign exchange reserves triggered the worst financial crisis since independence from Britain in 1948.

Sri Lanka has since made progress on about $11 billion of bilateral debt restructuring and hopes to have agreements in place with all key creditors, including bondholders, by May at the latest, Foreign Minister Ali Sabry told Reuters.

It will then focus on kick-starting major infrastructure projects suspended during the crisis, including a highway, an expansion of the main airport near Colombo and a $2 billion light railway project with Japan.

"We are looking at, within the next 12-24 months, somewhere in the region of about $5 billion worth of foreign currency infusion into the country in terms of projects and also from the sale of some state-owned enterprises," Sabry said in an interview.

Sri Lanka's private creditors account for about $16 billion of debt including international sovereign bonds, Sabry said.

"If we reach an agreement with them then we can...start lifting the moratorium on the foreign debt payments."

That would make it easier for investment to flow into Sri Lanka, including $1.5 billion committed for Colombo's Chinese-funded Port City, as well as renewable energy and port terminal projects by India's Adani Group.

"There is a bag of big projects lined up, hopefully it will...start once we finalise the debt restructuring," Sabry said.

Sri Lanka secured a $2.9 billion bailout from the International Monetary Fund (IMF) last March, helping to temper inflation, increase state revenue and rebuild foreign exchange reserves.

Its national carrier and main telecommunications company are on a list of state-owned enterprises to be revamped with private investment under the IMF program. Jio Platforms, a unit of India's Reliance Industries Ltd, is among the bidders for the latter.

(Reporting by Uditha Jayasinghe; editing by Sudipto Ganguly and Kirsten Donovan)