16 May 2023 08:50 am Views - 1222
From left: IMF Resident Representative in Sri Lanka Sarwan Jahan, Senior Mission Chief for Sri Lanka Peter Breuer, IMF Asia Pacific Department Director Krishna Srinivasan and IMF Communications Department Senior Press Officer Ting Yan - PIC BY PRADEEP PATHIRANA
By Indika Sakalsooriya
The International Monetary Fund (IMF) expects Sri Lanka to complete the debt restructuring process by the first review of the country’s US $ 3 billion programme, which is scheduled for September-October.
“The authorities are making good faith negotiations with all the creditors. The negotiations are going quite well. In terms of a timeline, it’s expected that the restructuring exercise will be completed by the first review of the programme, which is in September-October,” IMF Asia Pacific Department Director Krishna Srinivasan said.
An IMF staff mission is currently in Colombo for regular consultations ahead of the first programme review. The team has met with a wide range of stakeholders in the country, including President Ranil Wickremesinghe, who is also the Finance Minister, as well as the opposition, civil society organisations, trade unions and think tanks.
To negotiate with the country’s creditors, the government is expected to finalise a debt restructuring framework this month.
As of April, last year, Sri Lanka’s total debt stood at US $ 83.6 billion, with US $ 41.5 billion as foreign debt and US $ 42 billion as domestic debt. President Wickremesinghe recently informed Parliament that the outstanding debt from April to December of last year increased by US $ 2.7 billion, due to non-repayment of bilateral and private loans.
In order to achieve debt sustainability, Sri Lanka is seeking a US $ 17 billion debt reduction from its creditors through restructuring.
The visiting IMF officials have acknowledged that the uncertainty surrounding the debt restructuring is causing elevated interest rates in
the country.
“We have taken note of this uncertainty with regards to debt restructuring as elevated interest rates in the country. So, we are encouraging the authorities to come up with a strategy soon, so that this uncertainty can be resolved and the interest rates can come down, so it can be part of the virtuous cycle to restore stability,” IMF Senior Mission Chief for Sri Lanka Peter Breuer said.
However, both Breuer and Srinivasan clarified that the IMF does not get involved in debt restructuring negotiations but they stressed the importance of ensuring the stability of the country’s financial sector in any kind of restructuring.
“Our role is to ensure that whatever debt restructuring strategy authorities decide on is consistent with the debt targets that are designed for Sri Lanka to restore debt sustainability.
As such we don’t have a view on how the burden should be distributed across the creditors.
Having said that, we do have a key interest to ensure that the domestic economy and the domestic financial sector and the overall financial system continue to work and are stable,” Breuer said.
As reducing corruption vulnerabilities is a key pillar of the IMF programme, the Fund is currently conducting a diagnostic mission to assess Sri Lanka’s anti-corruption and governance framework.
Srinivasan said the diagnostic mission was carried out on Sri Lanka’s request.
The report of this exercise is expected by September and Srinivasan said its recommendation would be incorporated into the programme going forward.
Pix by Pradeep Pathirana