Will use 2nd IMF tranche to settle outstanding credit: Sri Lanka minister

Sri Lanka would use the second tranche of the IMF bailout package to settle overdue debts owed to multilateral creditors while accelerating the debt restructuring process, Finance Minister Shehan Semasinghe has said.

Sri Lanka is now in a position to receive the second tranche of USD 330 million, following the approval of the Staff-Level Agreement by the IMF Board of Governors.

The Staff-Level Agreement will enable the World Bank, the Asian Development Bank and other multilateral financial institutions to make the remaining payments, further accelerating debt restructuring efforts with international partners, Semasinghe said in a statement on Friday.

The IMF had in March this year approved an extended arrangement worth $2.9 billion for 48 months under the Extended Fund Facility (EFF) to support Sri Lanka’s economic policies and reforms.

Despite the first signs of stabilization, full economic recovery is not yet assured.

Sri Lanka’s external position has weakened due to the protracted debt restructuring talks, and reserve accumulation has slowed in recent months.

Sri Lanka needed to increase revenues and signal better governance by taking necessary tax measures.

The IMF said it wanted to ensure debt sustainability is restored in Sri Lanka. The debt targets were set in the IMF program when it started in March. The targets were related to the debt burden, with regard to debt servicing in domestic and foreign currencies and also with regard to the debt relief needed within the program period, the IMF said on Friday.