By: Staff Writer
Colombo (LNW): A group of Sri Lanka’s creditor nations are likely to reach an agreement on debt relief and an extension of repayment deadlines for the South Asian nation, Japan’s Jiji News reported on Wednesday, without naming a source or giving any details.
Japan co-chairs this group, together with France and India. China is Sri Lanka’s largest bilateral creditor and has steered clear of joining this group as a formal member.
Sri Lanka is expecting the official creditor committee representing bilateral creditors to follow China with an in-principle agreement very shortly, President Ranil Wickremesinghe said.
“China Exim Bank was the first to provide Sri Lanka with the agreement in principle,” President Wickremesinghe told the Sri Lanka Economic Summit 2023 organized by the Ceylon Chamber of Commerce.
“We expect the official creditors committee to provide a similar agreement in principle very shortly.”
Sri Lanka engaged with the OCC (made up of Paris Club, Japan and India), in parallel with China, President Wickremesinghe said.
“Contrary to many expectations Sri Lanka has been able to successfully navigate this process. You need transparency and good faith engagement,” he said.
“With this we expect the IMF board to be in a position to conclude the first review of Sri Lanka’s EFF program within the month of December.
“Discussions with external private creditors are ongoing in parallel and we expect to reach agreement on specific re-structuring terms with them very shortly.”
The IMF is expected to release 330 million dollars in budget support loans after a successful completion of the review once they are satisfied with the restructuring deals.
More funding from the Asian Development Bank, and World Bank which are linked to structural benchmarks on energy
Mired in its worst financial crisis in decades, Sri Lanka has been trying to reach restructuring deals with creditors since last year.
The agreement with the group of creditor nations came about a month after the debt-ridden island nation reached a deal with the Export-Import Bank of China covering about $4.2 billion of outstanding debt.
The EXIM deal will help Sri Lanka clear the first review of the bailout by Dec. 6 under the International Monetary Fund (IMF) executive board program, while securing a second IMF tranche of about $334 million, its finance ministry says.
In so doing, Colombo is also seeking to receive more clarity on its debt restructuring talks with key bilateral creditors. The approval would unlock $330 million in funding and signal progress for the four-year programme.
