14 December 2023 12:37 am Views - 148
According to Breuer, the second review is likely to be concluded by the end of the first half of next year.
Following the Executive Board of the IMF, completing the first review under the bailout package with Sri Lanka yesterday, the island nation is granted access to the second tranche of the facility, amounting to US $ 337 million.
The total amount the IMF has disbursed under the bailout now stands at US $ 670 million.
Breuer mentioned that an IMF team is scheduled to visit Sri Lanka in March-April and the completion of the second review is expected within approximately two months.
Sri Lanka has entered into in-principle debt restructuring deals with the Official Creditor Committee (OCC) led by France, Japan and India and also with the Exim Bank of China.
The in-principle deal with the OCC covers US $ 5.9 billion government debt and the deal with the Exim Bank of China covers US $ 4.2 billion, the country’s Finance Ministry said.
However, Sri Lanka is yet to strike a deal with its commercial creditors or bondholders. An initial proposal, involving restructuring the debt linked to GDP growth by the bondholders, was rejected by the Sri Lankan authorities.
According to the most recent data released by the Finance Ministry, Sri Lanka’s total external debt amounted to US $ 36.6 billion, with bilateral credit accounting for US $ 10.94 billion and commercial credit totalling US $ 14.73 billion.
As per the IMF estimates, Sri Lanka needs a debt reduction of about US $ 17 billion to restore its sustainability.
Responding to a question whether China, Sri Lanka’s largest bilateral creditor, should join the OCC, Breuer said such a need does not arise, as parallel negations by Sri Lanka with both parties appear to have worked.
Meanwhile, IMF Deputy Managing Director Kenji Okamura said Sri Lanka’s agreements in-principle with the OCC and Exim Bank of China of debt treatments are consistent with the targets of the
bailout package.
“They are an important milestone putting Sri Lanka’s debt on the path towards sustainability. A swift completion and signature of the memoranda of understanding with the official creditors is important. Timely implementation of the agreements, together with reaching resolution with external private creditors on comparable terms, should help restore Sri Lanka’s debt sustainability over the medium term,” Okamura said.
Sri Lanka’s Finance State Minister Shehan Semasinghe yesterday said the country would engage in good faith negotiations with private creditors to reach an agreement.
Despite the positive growth expected in the second half, Sri Lanka’s economy is expected to contract by 3.6 percent this year. The IMF estimates the economy to grow by 1.8 percent next year, with the economic activities picking up pace.