SL must seek equitable debt treatment from all creditors and multilateral development banks, India tells IMF

As India this week extended its financial assurance to help Sri Lanka restructure its debt, its government asserted to the International Monetary Fund (IMF) that the authorities of the crisis-hit nation are expected to seek equitable debt treatment from all commercial creditors and other official bilateral creditors.

In a letter to the IMF Managing Director Kristalina Georgieva, India’s Finance Ministry said it also expects Sri Lanka to seek adequate financing contributions from multilateral development banks. 

“We hereby confirm our strong support for Sri Lanka’s prospective EFF supported programme and commit to supporting Sri Lanka with financing/debt relief consistent with restoring Sri Lanka’s public debt sustainability under the IMF-supported programme and ensuring that the programme is fully financed as projected by IMF staff,” Additional Secretary to India’s Finance Ministry, Rajat Kumar Mishra said in the letter to the IMF.

The financing and debt relief, which will be provided by the Export Import Bank of India, will be consistent with restoring debt sustainability under the IMF-supported programme.

IMF’s debt sustainability assessment will be underpinned by the programme targets of reducing the ratio of public debt to GDP to below 95 percent by 2032, keeping the central government’s annual gross financing needs below 13 percent of GDP on average in 2027-32, maintaining the central government’s annual foreign currency debt service below 4.5 percent of GDP in every year in 2027-32 and closing Sri Lanka’s external financing gap.

India affirmed that it is committed to continuing negotiations with the Sri Lankan government along with the Paris Club on a medium-to-long term debt treatment through maturity extension and interest rate reduction or any other financial operation that would deliver similar financing/debt relief.

”We look forward to continuing cordial and in-depth discussions with the Sri Lankan authorities, IMF and the Paris Club with a view to finalising the specifics of this financing/debt relief in the coming weeks,” said Mishra.