Sri Lanka's Central Bank Chief confident of completing IMF review

COLOMBO (News 1st); Sri Lanka's Central Bank Governor said he is confident that the first review of the IMF supported program will be completed shortly, so that the country can access the second tranche of the bailout package.

He was speaking at the 44th National Conference of Chartered Accountants, organized by CA Sri Lanka.

"The Government and the Central Bank are continuing to make progress on the Extended Fund Facility program, EFF, from the International Monetary Fund, which we managed to secure within a short period, earlier this year. With the successful completion of the domestic debt restructuring process, where CA also helped us a lot, and the notable progress on the external debt restructuring front that we have been making, we are confident of the successful completion of the first review, which will enable us to receive the second tranche shortly," explained the Central Bank Governor.

"I am very confident that we should be able to complete the process, and we will move in the right direction faster than expected," he added.

The Governor said that the government and the Central Bank are progressing with the debt restructuring efforts in a meticulous and prudent manner to ensure that the country will get the most optimal solutions with the least burden to the overall citizenry and the macroeconomy. 

"Through the course of these developments, the Central Bank of Sri Lanka remains committed to ensuring the stability of the financial system as well as the macroeconomy," he added.

"Going forward, we expect the second half in 2023 to turn into a positive growth recovery in terms of the economy ," said the Governor.

On Tuesday (3), Reuters reported that Sri Lanka’s major creditors such as Japan, India and France are likely to reach a broad agreement this month on debt reduction steps including extending repayments.

Reuters quoting the Sankei newspaper reported that Sri Lanka has held multiple rounds of talks with bondholders and bilateral creditors including Japan, China and India on reworking its foreign debt after suspending repayments in May last year.

It said that a group of Sri Lanka’s major creditors including the United States, Japan and India want to sign a memorandum of understanding with the country around the time of the International Monetary Fund and World Bank meetings later this month in Morocco.

China has resisted joining the group but it remains an observer.

A senior Japanese finance ministry official told Reuters that they are aiming to reach an agreement among creditor nations with or without China.

At the sametime, the US government said a bondholder’s lawsuit against Sri Lanka over the country’s historic debt default should be put on hold, reported Bloomberg.

In a statement of interest filed in the New York federal court, the US backed the Sri Lankan government’s request to delay a lawsuit by Hamilton Reserve Bank Ltd. seeking full payment and accrued interest on more than $250 million in bonds that came due in July 2022. 

The US said the delay would help with ongoing restructuring talks between the South Asian country and other creditors.

Sri Lanka fell into default in May 2022 after the expiration of a 30-day grace period for missed interest payments on two of its sovereign bonds, the first debt default by the country since it gained independence from Britain in 1948. Hamilton Bank sued Sri Lanka in July 2022

Sri Lanka in July asked US District Judge Denise Cote to put the case on hold for six months. Cote had put her decision on hold until the US decided whether or not to file a statement of interest.

The French and UK governments previously asked the court to put the suit on hold. 

Hamilton Reserve has opposed the bid to postpone the proceedings, saying that putting them on hold “would be both contrary to US policy interests and an exercise in futility.”