Discussions with IMF ongoing for staff-level agreement, says Finance Ministry

Discussions with the International Monetary Fund (IMF) have resumed with the formation of a new government, with a view to finalising the remaining policy matters that needed to be agreed upon prior to reaching the agreement, the Finance Ministry said.

In a statement to the media yesterday, the ministry pointed out Sri Lanka has not been successful in reaching a staff-level agreement with the IMF as yet, due to several changes in the administration since May 2022 that took place, due to the social unrest and political instability in the country.

“A staff-level agreement would be an important milestone towards the IMF Board approval for the EFF programme, which in turn would help unlock bridging finance to support the much-needed external financing for Sri Lanka,” the Finance Ministry said.

The ministry shared that the Sri Lankan authorities are working with debt restructuring advisor Lazard and Clifford Chance to reach a consensus on debt restructuring arrangements with the creditors.

“The advisors have made considerable progress in the analytical framework for the debt operation, prior to formal engagements with Sri Lanka’s creditors,” the ministry said.

The statement highlighted that the government is committed to engaging its creditors in good faith, with a view to reaching a comprehensive debt restructuring programme that provides a fair and sustainable outcome for all stakeholders.

Sri Lanka has engaged in discussions with the IMF with a view to entering an Extended Financing Facility to support the country’s macroeconomic reform programme. After the Spring Meetings with the IMF in April 2022, a virtual mission took place in early May, followed by an IMF mission to Colombo from June 20 to 30.

Discussions continued virtually with a view to reaching a staff-level agreement. According to the Finance Ministry, substantial progress was made during the discussions on the fiscal, monetary and structural reforms necessary to stabilise the economy.