Sri Lanka expects up to US$ 8bn more in loans and asset restructuring

• Foreign Minister notes additional funds critical for the country already burdened with public external debt amounting to US$ 40.6 bn
• Says country targets additional US$ 4-5 bn from all sources apart from IMF
• Says economic growth will return only in 2024

REUTERS: Sri Lanka is expecting as much as US$ 5 billion in loans next year from multilateral agencies besides an IMF deal, while the government is aiming to raise up to US$ 3 billion via restructuring of state assets, its foreign minister told Reuters on Wednesday.

The island nation’s worst economic crisis in more than seven decades has resulted in widespread unrest due to shortages of food and fuel. Its then-president Gotabaya Rajapaksa was ousted in July.
Additional funds are critical for the country that is already saddled with a public external debt of US$ 40.6 billion, of which it owes 22 percent to Chinese creditors.

In September, the country of 22 million reached an agreement with the IMF for a loan of US$ 2.9 billion, which could be approved for disbursal next year.
“Apart from what we get from the IMF, we are looking at all others, the multilaterals put together another US$ 4- US$ 5 billion,” Foreign Affairs Minister Ali Sabry said in an interview.

“The President is interested in restructuring some of the (state) institutions, so through that if we can raise US$ 2- US$ 3 billion, our treasury and reserves become strengthened.”
Sri Lanka was expecting to seek IMF board approval for the loan in December but that has likely been pushed to January, the minister said, as the government works to lock in financing assurances from countries including China, Japan and India, as well as private creditors.

Sabry said Sri Lanka was still waiting for “letters of assurance” for debt restructuring from its largest bilateral creditor China, as well as India.
The two countries have backed the restructuring efforts and Sri Lanka has shared documents and data with them, he said.

“We have made it very clear to the IMF, to our multilateral partners and to our bilateral friends that patience is running out and it is urgent for the sake of Sri Lankans and the good health of the world economy,” Sabry said.
Overall, Sri Lanka’s economy has improved with essential imports such as fuel and food becoming regular, Sabry said.

Inflation, which edged above 70 percent earlier this year, eased to 61 percent at the end of November but the economy is expected to contract by about 8.7 percent this year.
“Some stability is taking place. Then growth can return,” Sabry said. “So that should start in the next quarter of next year with the IMF loan coming in, other multilateral agencies coming in. But for growth to take place, it is going to be 2024.”