Sri Lanka Urged by IMF to Solidify Deals with Creditors for Economic Recovery

Sri Lanka Urged by IMF to Solidify Deals with Creditors for Economic Recovery

VoM News Desk | December 13, 2023 | 10:35 PM IST | Sri Lanka | Follow on Google News

Sri Lanka Urged by IMF to Solidify Deals with Creditors for Economic Recovery (Representative image)

Sri Lanka Urged by IMF to Solidify Deals with Creditors for Economic Recovery

According to the Daily Mirror, Peter Breuer of the International Monetary Fund (IMF) emphasized the necessity for Sri Lanka to finalize agreements with both its official and private creditors before the anticipated conclusion of the second review of the Extended Fund Facility (EFF). Expected to be completed by the first half of the upcoming year, the IMF team is slated to visit Colombo between March and April and wrap up the review by June.

While Sri Lanka has made in-principle debt restructuring agreements with the Official Creditor Committee (OCC), spearheaded by France, China, and India, as well as with the Exim Bank of China, negotiations with commercial creditors and bondholders are still pending. Sri Lankan authorities rejected an initial proposal from bondholders, which involved restructuring debt linked to GDP growth, as reported by the Daily Mirror.

In September, the IMF noted that although there were early signs of stabilization in Sri Lanka, complete economic recovery remained uncertain. The country’s growth momentum continued to lag, with second-quarter real GDP experiencing a 3.1% contraction year-on-year. Additionally, economic indicators provided mixed signals, and the pace of reserve accumulation had decreased in recent months, according to the IMF.

During a visit to Colombo from September 14-27, an IMF mission team led by Peter Breuer and Katsiaryna Svirydzenka discussed economic and financial policies to facilitate the approval of the First Review under the EFF arrangement. At the mission’s end, Breuer and Svirydzenka commended Sri Lanka’s progress in implementing reforms but stressed that complete economic recovery was not yet guaranteed.

Sri Lanka stands at a critical juncture, urged by the IMF to solidify agreements with its creditors to pave the way for a more secure economic revival.

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