Colombo (LNW): The Executive Board of the International Monetary Fund (IMF) is scheduled to review the first assessment of Sri Lanka’s 48-month Extended Fund Facility (EFF) Arrangement on December 12, as outlined in the global lender’s Executive Board calendar.
The agenda for the meeting includes the first review of Sri Lanka’s extended arrangement under the EFF, a request for a waiver of nonobservance of performance criteria, a request for the modification of performance criteria, a financing assurances review, and the rephasing of access.
Facing its most severe financial crisis in seven decades last year due to dwindling foreign exchange reserves, Sri Lanka secured a USD 2.9 billion IMF bailout in March. Since then, the South Asian nation has made strides in stabilising its economy, curbing inflation, and rebuilding currency reserves.
An IMF mission conducted the first review of the EFF-supported economic adjustment program during a visit to Sri Lanka from September 14-27. In October, Sri Lanka and the IMF reached a staff-level agreement on economic policies, a crucial step towards concluding the first review.
Approval of the review by the IMF Management and Executive Board is expected to unlock the second tranche of approximately USD 330 million in financing, bringing the total IMF financial support disbursed under the arrangement to around USD 660 million.
Sri Lanka has also reached in-principle agreements with the Export-Import (Exim) Bank of China, its largest bilateral creditor, and the Official Creditor Committee (OCC) to restructure its debts.
On November 29, the Sri Lankan government and the OCC announced an in-principle agreement on the financial terms of debt treatment, covering about USD 5.9 billion of outstanding public debt.
This deal includes a combination of long-term maturity extension and a reduction in interest rates.
Established in May 2023, the OCC, co-chaired by India, Japan, and France (as the chair of the Paris Club), played a pivotal role in coordinating the restructuring of Sri Lanka’s debt.
The committee, comprising 17 countries, engaged extensively with Sri Lankan authorities, the IMF, the World Bank, China, and Sri Lanka’s private creditors.
The agreement with the OCC followed a similar deal with China’s Exim Bank, which covered approximately USD 4.2 billion of outstanding debt.
The IMF has indicated that these agreements pave the way for considering the clearance of the first review of the bailout.