Financing assurances obtained by SL thus far inadequate to proceed with EFF: IMF

• Says as soon as adequate assurances are obtained, EFF for SL can be presented to IMF’s board
• Acknowledges SL’s efforts in engaging with bilateral creditors and bringing in domestic reforms
• Welcomes recent financing assurances from Paris Club

With the dawn of the new year, Sri Lanka made significant progress in obtaining financing assurances from its creditors to help unlock the International Monetary Fund (IMF) bailout package; however, according to the multilateral funding agency, what the island nation has managed to bag so far is not enough.

A spokesperson for the IMF yesterday pointed out that the assurances received thus far are inadequate for the island nation to gain access to the much-awaited relief, which is imperative to pull the economy out from the ongoing crisis.

“As soon as adequate assurances are obtained and remaining requirements are met, including by the Sri Lankan authorities, the EFF arrangement for Sri Lanka can be presented to the IMF’s Executive Board for approval,” the spokesperson said.

While sharing an update on the progress of the envisaged Extended Fund Facility (EFF) to Sri Lanka, the IMF acknowledged that the island nation continues to engage with official bilateral creditors to obtain financing assurances and also continues to advance domestic reforms.

However, much more is expected from the Sri Lankan authorities to obtain the approval for the US $ 2.9 billion loan. 

The IMF welcomed the recent statement by the Paris Club, providing financing assurances to Sri Lanka, following the assurances provided by India.

India was the first to provide financing assurances to Sri Lanka, where it directly communicated to the IMF its intention.

Earlier this week, the Paris Club of creditor nations provided the required financing assurances where they affirmed commitment to negotiate debt restructuring with Sri Lanka in accordance with the comparability of treatment principle and with the goal of restoring debt sustainability. 

The Paris Club members urged other official bilateral creditors, including China, to do the same in line with the IMF programme parameters.

Sri Lanka awaits with bated breath for assurances from China. A solid, straight forward communiqué is still pending from the country’s largest bilateral creditor.

On February 3, China’s EXIM Bank said it was offering a two-year moratorium on its debt to Sri Lanka, which means the island nation will not have to repay the principal and interest due during the said period.

Although the decision from China is an attempt towards supporting Sri Lanka in unlocking the IMF package, it is not enough, as it is not similar to what other creditors have offered.

President Ranil Wickremesinghe addressing Parliament this week shared that the government is in “direct discussions” with China.

“We have received positive responses from all parties. We are now working towards unifying the approaches of other countries and that of China,” he said.

IMF Executive Director Kristalina Georgieva earlier this week went on record stating that China has to change its debt policies because low-income countries are struggling to pay back loans.

Acknowledging that China, over the years, has been reluctant to negotiate on their loans, Georgieva stressed that the creditor has to “proactively seek a restructuring of the debt obligations”.