HomeEconomic IndicatorIMF confirms ongoing negotiations on Sri Lanka's debt without knowledge of any...

IMF confirms ongoing negotiations on Sri Lanka’s debt without knowledge of any specific agreements.

IMF Unaware of Specific Agreements on Sri Lanka Debt Talks

IMF Official Responds to China Announcement

The International Monetary Fund (IMF) has stated that it was not informed about any specific agreements regarding Sri Lankan debt talks, following China’s recent announcement of an agreement with the country. Peter Breuer, a fund official, confirmed that talks between Sri Lanka and its creditors, including China, are still ongoing. He emphasized that the IMF will need to assess the entire package of agreements to ensure consistency with IMF debt targets.

Sri Lanka’s Economic Crisis and Debt Restructuring

Sri Lanka is currently facing its worst economic crisis in 70 years and is engaged in debt restructuring talks with various creditors. China is the largest single creditor of Sri Lanka. In May 2022, Colombo suspended debt repayments. Sri Lanka’s finance ministry announced that the Export-Import Bank of China has extended an initial debt restructuring deal, which Finance Minister Ranjith Siyambalapitiya believes will benefit the country’s economy.

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IMF Bailout and Other Creditors

Sri Lanka is also in discussions for a $2.9 billion IMF bailout. However, the IMF declined to release a second tranche of approximately $330 million in September due to concerns about a possible government revenue shortfall. Other bilateral creditors, including the Paris Club, Japan, and India, are expected to make an announcement on a deal during the IMF meetings.

Multilateral Efforts to Address Debt Woes

Japan, India, and France have formed a common platform for talks among bilateral creditors to coordinate the restructuring of Sri Lanka’s debt. They hope that this initiative will serve as a model for resolving debt issues faced by middle-income economies. As Sri Lanka is not part of the G20 debt initiative known as the Common Framework, separate talks with official creditors from China are being conducted.

Expert Opinion on the Exim Agreement

Jamie Fallon, an economist with Tellimer Research, described the agreement with the Export-Import Bank of China as a “surprise deal.” He believes that this development could pave the way for further agreements with commercial and bilateral creditors. Fallon also highlighted the importance of IMF board approval for the next round of extended fund facility funding, provided other points of contention, such as revenue shortfalls, can be addressed.

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By Jorgelina do Rosario

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