IMF Presses for Progress in Sri Lanka's Debt Deals

COLOMBO (News 1st); Sri Lanka's efforts to restructure its crippling debt face critical hurdles as the International Monetary Fund (IMF) pushes for concrete agreements with creditors ahead of the program's second review. While acknowledging commendable progress, IMF officials highlighted unfinished business with both official and private lenders, posing potential roadblocks to economic recovery.

Peter Breuer, IMF Senior Mission Chief for Sri Lanka, emphasized the urgency of finalizing agreements with creditors. "Swift completion of agreements with official creditors and private bondholders remains critical," he stated. Progress on this front will be "formally assessed" during the second review of the Extended Fund Facility (EFF) arrangement, scheduled alongside the 2024 Article IV consultation, a crucial assessment of Sri Lanka's economic health.

Breuer lauded past achievements, noting that "having reached agreements in principle with official creditors is an important milestone," following the successful domestic debt restructuring operation. Now, the challenge lies in converting these principles into concrete agreements.

Negotiations with private bondholders, representing a significant portion of the debt, are also ongoing. "Proposals are being exchanged," Breuer said, expressing "strong expectation" of an agreement in principle by the second review, later this year.

Recognizing the intricate landscape of Sri Lanka's debt, Breuer explained the sequential approach adopted for restructuring. "It's around 10 different processes, very complicated with the creditor landscape," he said, justifying the current strategy that prioritizes major blocks like official creditors before tackling others.

With the agreement in principle with China Exim Bank needing "conversion," a successful deal with China Development Bank remains crucial. Ongoing negotiations with this commercial creditor will be closely watched in the coming months.