Sri Lanka has made ‘strong progress’ in debt restructuring, the IMF says
Sri Lanka’s macroeconomic policy reforms are beginning to bear fruit and the country is expected to sign deals with external commercial creditors soon, the IMF has said ahead of the second review of its US$2.9 billion bailout program dollar for the country that is in financial need.
At a press conference on Friday, Julie Kozack, Director of Communications at the International Monetary Fund (IMF), asserted that Sri Lanka has made “sufficiently strong progress on debt restructuring”.
She said the island nation’s program performance is “strong”, with most of the quantitative and structural conditions for the second review having been met or implemented with a delay. She added that reforms are still ongoing in some areas.
The second review of the IMF’s Extended Fund Facility under Sri Lanka’s $2.9 billion bailout is scheduled for June 12.
Kozack confirmed that the IMF Board of Governors will meet to discuss the second review and the Article IV consultations.
Under Article IV of the IMF’s Articles of Agreement, the global lender conducts bilateral discussions with members, typically every year, during which a staff team visits the country, collects economic and financial information and reviews economic developments and policies with officials of the country discusses.
“In Sri Lanka, we see macroeconomic policy reforms beginning to bear fruit,” Kozack said, adding that “commendable results” include rapid disinflation, robust reserve accumulation and the first signs of economic growth while maintaining the stability of the financial system.
She said Colombo’s next steps on debt restructuring include concluding negotiations with external commercial creditors and implementing agreements in principle with official creditors.
Kozack said Sri Lanka’s domestic debt operations have been largely completed and debt restructuring discussions are continuing.
“The authorities have held extensive discussions with external official creditors on an MOU (memorandum of understanding) with the official creditors committee and final agreements with the Export-Import Bank of China,” she said, adding that discussions with the China Development Bank are ongoing is also at an advanced stage.
“There is a strong expectation that agreements will soon be reached with external commercial creditors in line with the program parameters. Overall, we believe that sufficiently strong progress has been made on debt restructuring,” she said .
In March, the Washington-based IMF said it had reached a staff-level agreement with Sri Lanka for the next phase, allowing access to $337 million from the nearly $3 billion bailout approved in 2023 for the cash-strapped country is in. Two tranches of $330 million each were released in March and December 2023.
In April 2022, Sri Lanka declared bankruptcy for the first time since independence from Britain in 1948.
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First print: June 8, 2024 | 2:00 IST