Collective effort key for supporting Sri Lanka’s success in debt restructuring: IMF chief

In an effort to capitalise on the momentum of the rapid progress in debt restructuring, collective effort is key for supporting Sri Lanka’s success in this area, the International Monetary Fund (IMF) said.

As the authorities continue to finalise the remaining debt restructuring agreements, IMF Managing Director Kristalina Georgieva emphasised that high creditor participation is essential for the programme’s success. 

In a statement to the members of the financial community, she remarked, “The Sri Lankan authorities have reaffirmed their determination to persevere with their reform agenda and put the economy on a path of sustained and high growth. The continued support from international financial institutions and other official creditors, together with the participation of bondholders in a debt exchange consistent with debt sustainability, is necessary to underpin the success of these reform efforts.”

After several months of constructive discussions, the Sri Lankan authorities reached agreements with both the Steering Committee of the Ad Hoc Group of external bondholders and Local Consortium of Sri Lanka.

The IMF staff have assessed the terms of these agreements and confirmed that they align with the parameters of the IMF-supported programme.

“Anchored by policies under the IMF-supported programme, the successful implementation of these agreements will provide significant external debt service relief and further contribute to Sri Lanka’s efforts to restore debt sustainability,” Georgieva added.

The Sri Lankan authorities have been implementing an ambitious economic reform programme supported by the IMF, aimed at restoring debt sustainability, achieving external viability, driving broad macroeconomic reforms and strengthening governance and transparency in the economy.

Sri Lanka’s economic reform programme is supported by an SDR 2.286 billion (approximately US $ 3 billion), 48-month Extended Fund Facility arrangement approved by the IMF’s Executive Board on March 20, 2023. The IMF noted that the programme has made a strong start, with the economy recovering, inflation remaining low and foreign reserves being accumulated. Following the completion of two reviews, the IMF staff reached a staff-level agreement with the authorities on November 23, for the third review under the arrangement. In June 2024, Sri Lanka signed a memorandum of understanding with the Official Creditors Committee and reached a final agreement with China EXIM Bank. This agreement will provide debt treatment by these creditors, aimed at restoring debt sustainability consistent with the IMF programme’s parameters.