By: Staff Writer
August 05, Colombo (LNW): The Finance Ministry yesterday said Sri Lanka has received an initial assessment from its Official Creditor Committee (OCC) regarding the Comparability of Treatment (COT) under the Joint Working Framework (JWF) agreed upon between Sri Lankan authorities and the Ad-Hoc Group of bondholders.
It said further details are being sought to advance the engagement with bondholders and finalise the external debt restructuring process.
Immediately following the finalisation of a memorandum of understanding (MOU) with the Official Creditor Committee (OCC) and restructuring agreements with Exim Bank of China on 26th June 2024, the AHG and Sri Lanka resumed restricted negotiations on the 27th – 28th of June in Paris.
The AHG had submitted a new proposal which made further adjustments to address Sri Lanka’s concerns on the four outstanding points. During the negotiations in Paris, further adjustments were agreed in a Joint Working Framework
The Joint Working Framework negotiated with the AHG provides a fair balance of risk sharing and sufficiently addresses the concerns of Sri Lanka and the requirements of bondholders.
The MLB structure, following the adjustments made through the evolution of the proposed instrument, enables the appropriate sharing of upside between creditors and the debtor, whilst also ensuring that in this process, the debt sustainability of the debtor sovereign is not compromised.
These terms require formal confirmation by the Secretariat of the Official Creditor Committee and the IMF staff in order to confirm conformity with comparability of treatment requirements and compliance with Sri Lanka’s IMF program debt sustainability targets.
The Ministry also said during the visit of the IMF Staff Mission, discussions centred on the ongoing debt restructuring process. This included an assessment of the JWF and evaluation focused on ensuring compliance with program parameters and debt sustainability considerations.
In a statement, the Finance Ministry said the IMF Staff mission led by Senior Mission Chief Peter Breuer cautioned against any policy slippage that could jeopardise the hard-won economic gains achieved thus far, whilst acknowledging the positive developments in the economic landscape and underscoring the critical importance of sustaining the momentum of reforms.
The team concluded a visit to Sri Lanka spanning from 25 July to 2 August where the primary objective was to assess the progress of Sri Lanka’s macroeconomic reforms and economic performance.
The Finance Ministry noted that the IMF acknowledged the progress made in terms of recovery of economic growth, improved fiscal outcomes through revenue enhancement, supported by tax reforms, effective control of inflation, and enhancement of foreign exchange reserves.
The staff visit also discussed the recent reform efforts, such as the passage of the Public Financial Management Act and the Public Debt Management Act, noting the potential of these measures to support fiscal discipline and improve debt management.
