‘We Need Fairness in Sri Lanka’s Debt Reworking’ – US Ambassador

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COLOMBO (News 1st); The US Ambassador to Sri Lanka has reinforced the need for fairness in Sri Lanka’s debt restructuring, in her meeting with the Governor of the Central Bank of Sri Lanka.

Ambassador Julie Chung met with Governor Dr. Nandalal Weerasinghe in Colombo where she also extended congratulations on the IMF’s staff-level agreement, marking progress in Sri Lanka’s effort to secure the second IMF installment.  

Reinforcing the need for fairness in Sri Lanka’s debt restructuring, the Ambassador stressed the fact that equal & equitable treatment for all creditors is essential, while adding that transparency from every party involved is crucial. 

The United States remains committed to an economic landscape that values fairness, transparency, integrity, and inclusivity, ensuring stability & growth in Sri Lanka, she posted on X, formerly known as twitter.

On the 19th of October, IMF staff and the Sri Lankan authorities reached a staff-level agreement on economic policies to conclude the first review of the 48-month EFF-supported program. 

Sri Lanka will have access to SDR 254 million (about US$330 million) in financing once the review is approved by IMF management and the IMF Executive Board.

Completion of the review by the IMF’s Executive Board requires: (i) the implementation by the authorities of all prior actions; and (ii) the completion of financing assurances reviews.

At the 2023 Annual Meetings of the International Monetary Fund and the World Bank in Marrakech, Morocco, the IMF said that for emerging market and developing economies like Sri Lanka that are suffering from funding stress on external markets, faster and more efficient coordination on debt resolution is needed.

Sri Lanka’s debt treatment program is moving at a faster pace compared to the programs implemented in other countries, said Indian Finance Minister Nilmala Sitharaman on Friday (13) during a media briefing.

The G20 Finance Ministers and Central Bank Governors welcomed all efforts for timely resolution of the debt situation of Sri Lanka and the ongoing progress, and called for its swift conclusion as soon as possible.

This was announced following the Fourth G20 Finance Ministers and Central Bank Governors Meeting in Marrakech, Morocco that took place on the 12th and 13th of October.

Reforming State-Owned enterprises is one of the key elements in Sri Lanka’s debt reworking process.

The IMF and the Wold Bank is pushing ahead with reforms of SOEs, including the electricity sector, said Krishna Srinivasan, the Director of the Asia-Pacific Department (IMF), during a press conference in Marrakech on 13th October.

“Efficiency in the energy and electricity sectors could be increased, with structural reforms. In general, SOE reforms are important to Sri Lanka and that is part of the program that we have. The IMF and the Wold Bank is pushing ahead with reforms of SOEs, including the electricity sector, he noted”

Krishna Srinivasan, the Director of the Asia-Pacific Department of the IMF said that if private creditors have put forward a proposal which includes GDP linked bonds, that is for Sri Lankan authorities and advisors, to engage with them. 

Sri Lanka’s private creditors have sent a proposal on how to restructure $12 billion of overseas debt, including a new type of bond designed to ease repayments in case of future economic pressure, said two sources with direct knowledge of the matter, as reported by Sri Lankan media on Friday (13) morning.

The Director of the Asia-Pacific Department of the IMF said the role of the fund comes in terms of to see how any kind of agreement  is consistent with the debt targets.

It was during this period that it was also announced that China reached a tentative debt agreement with Sri Lanka, front-running separate talks the International Monetary Fund and other creditors are holding with the South Asian nation and catching them by surprise.

The deal between Export-Import Bank of China and Sri Lanka was reached late last month, China’s Foreign Ministry.

“We have taken note of a tentative agreement between Sri Lanka and the Export-Import Bank of China and look forward to analyzing the details when we receive them. We urge all official creditors to move forward and agree on an appropriate debt treatment in line with the financing assurances they provided. We understand negotiations between commercial creditors and Sri Lanka are ongoing and emphasize the need to restore debt sustainability in a robust manner. Delays risk worsening the economic outlook for Sri Lanka, widening its financing gaps, hindering its return to sustainable growth, and thereby reducing its capacity to repay,” said the IMF in a statement after reaching a Staff-Level Agreement on the First Review of Sri Lanka’s Extended Fund Facility Arrangement.

Source: News First