1 September 2022 02:34 am Views - 376
Sri Lanka has sealed a deal with the International Monetary Fund (IMF) for a staff-level agreement, Reuters reported yesterday quoting unnamed sources.
An IMF team arrived in Colombo on the 24th with the objective of holding discussions with Sri Lankan authorities that may eventually lead to a staff-level deal. Following a Reuters news report, the IMF said the visiting team that arrived a week ago had extended its stay by a day and would address a news conference at the Central Bank today.
“The IMF Mission in Colombo has been extended by one day because discussions are still ongoing with the authorities,” it said in a statement, while confirming nor denying the Reuters news report.
Following a staff-level agreement with the IMF, Sri Lanka is expected to officially approach its bi-lateral, multi-lateral and private creditors to restructure its debt with them.
Sri Lanka is looking to restructure about US $ 29 billion, out of which ISBs account for US $ 19 billion.
Also, a staff-level agreement could unlock some bridge financing for Sri Lanka until a bailout package is approved by the IMF Executive Board.
The duration between a staff-level pact and a bailout package varies from case to case. Assurances from Sri Lanka’s creditors to make the country’s debt sustainable—most likely by way of haircuts—may be required for the IMF Executive Board to consider an Extended Fund Facility for Sri Lanka.
Experts have pointed out how China will respond to Sri Lanka’s request to restructure its debt them could be the deciding factor on how soon Sri Lanka could secure the IMF moneys.
While other creditor nations have broadly expressed their willingness to restructure their debt with Sri Lanka, China has so far evaded Sri Lanka’s request.
Sri Lanka owes China some US $6.5 billion in financing including development bank loans and a central bank swap, according to data from the Institute of International Finance.
Another sticking point in the debt restructure process could be the Sri Lankan government’s reluctance to restructure its rupee-denominated domestic debt.