Sri Lanka confident of meeting conditions for IMF funding

(Bloomberg) -- Sri Lanka is hopeful it can resolve debt restructuring issues in the second quarter so it can get financing from the International Monetary Fund because external creditors are all engaging “positively,” according to the South Asian nation’s junior finance minister.

“We are looking forward to a positive outcome” of discussions taking place in London with Sri Lanka’s bondholders, Shehan Semasinghe said Thursday on the sidelines of the Boao Forum in the southern Chinese province of Hainan. “Unlocking access to the tranche is very important to Sri Lanka,” he added.

Semasinghe also said Chinese leader Xi Jinping pledged during “very productive bilateral discussion” this week with Prime Minister Dinesh Gunawardena in Beijing to reinforce links between Sri Lankan authorities and Export Import Bank of China and China Development Bank.

Sri Lanka last week secured initial approval for a $337 million payout from the IMF, though more progress on debt restructuring remains key to unlocking the funding. Sri Lanka has to firm up a preliminary debt restructuring agreement with China ExIm and reach an in-principle deal with China Development Bank, the IMF has said.

The government also has to enter memorandums of understanding with official creditors, including India and the Paris Club and reach a deal with its bondholders for the IMF’s board to approve the next tranche of the $3 billion bailout. Sri Lankan President Ranil Wickremesinghe has said that the nation is seeking relief from payments through 2027.

Semasinghe said Sri Lanka plans to introduce a law to carry forward reforms that have helped the nation get through an unprecedented economic crisis and historic debt default in 2022.

“These will enhance confidence in the Sri Lankan economy and boost confidence among all creditor nations,” he said.