Sri Lanka Hopeful Of Debt Agreements On Long-Term Sustainability

Sri Lanka Hopeful Of Debt Agreements On Long-Term Sustainability

Sri Lanka maintains a positive expectation that all creditors will agree to debt restructuring measures aimed at enabling Sri Lanka to achieve long-term debt sustainability, said Central Bank Governor Dr. Nandalal Weerasinghe on Tuesday (7).

Speaking to reporters in Colombo, Dr. Weerasinghe noted that following the completion of Domestic Debt Restructuring, progress has been made in external debt restructuring.

He noted that Agreements-In-Principle were reached with bilateral creditors, and the final agreements are being prepared, adding that those agreements will be signed soon.

In 2023, Sri Lanka reached Agreements in principle with the Official Creditor Committee and Export-Import Bank of China on debt treatments consistent with IMF-supported program parameters.

The IMF said that these are important milestones that put Sri Lanka’s debt on the path towards sustainability.

The Central Bank governor went on to note that discussions with ISB holders are ongoing, with a second round of talks expected soon.

Despite setbacks in private creditor debt restructuring, the IMF said in early May that it is hopeful that a conclusion can be reached, soon.

Krishna Srinivasan, Director of the International Monetary Fund’s Asia and Pacific Department, highlighted positive advancements in discussions with official creditors, expressing encouragement over the developments in this realm.

Regarding negotiations with private creditors, Srinivasan noted ongoing discussions while emphasizing the IMF’s non-involvement in these talks.

He reiterated the IMF’s role as an observer, providing input to negotiating parties on macro frameworks and anticipated outcomes.

Despite acknowledging setbacks in private sector restructuring, Srinivasan remained optimistic about the ongoing dialogue and expressed hope for eventual resolutions.

Srinivasan also commended the program’s effectiveness in meeting expectations, citing improvements in economic indicators such as growth acceleration, inflation reduction, and rising reserves.

However, he cautioned about the challenges ahead, emphasizing the necessity of continued reforms, particularly in fiscal policies and structural reforms.

Notably, Srinivasan underscored the significance of governance enhancement and corruption mitigation as pivotal areas for reform.

With regard to the third tranche of the IMF-supported program for Sri Lanka, the governor said that the IMF Executive Board approval for the disbursement of funds will hopefully be secured in June 2024.