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Sri Lanka archives commendable progress towards debt sustainability: IMF

By: Staff Writer

January 22, Colombo (LNW): The Sri Lankan authorities have made commendable progress with putting debt on a path towards sustainability while engaging with its private bond holders and expected to complete the agreement by end of the March quarter of 2024.

However, it is yet to reach consensus on the debt restructuring with sovereign bond holders, who had lent over $25 billion before Sri Lanka declared default in April 2022.

“By the first quarter,the government  will conclude the MOUs,” state minister of finance Shehan Semasinghe said, referring to striking a deal with private or sovereign bond holders.

“Now we are engaging with bond holders and they are also engaging with interest to conclude it as early as possible.”he added.

“Our expectation is to come to a resolution with bond holders as early as possible. They have shown a positive signal of coming into a debt resolution with usm he disclosed.

The execution of the domestic debt restructuring was an important milestone. A swift completion of final agreements with official creditors and reaching a resolution with external private creditors remain critical, senior Internatuonal Monetary Fund ( IMF )mission Chief Peter Breuer told a media conference recently.

Progress in meeting key commitments under the IMF supported program will be formally assessed in the context of the second review of the EFF arrangement alongside the forthcoming 2024 Article IV Consultation, which will assess Sri Lanka’s economic health, he added.

On the question with respect to the debt restructuring. So there’s sort of two important things that need to happen going forward. First, it should be said that having reached agreements in principle with official creditors is an important milestone, and that follows the milestone of having completed the domestic debt operation.

So now what needs to be done is to finalize these agreements in principle, or rather to convert them into actual agreements with the official creditors so as to complete that portion of the debt restructuring.

And secondly, reach agreements in principle with the commercial creditors where the bondholders are, of course, a significant proportion.

So our understanding is that negotiations are ongoing, proposals are being exchanged, and it is important for that process to continue and be completed as quickly as possible.

It’s our strong expectation that there would be an agreement in principle by the time of the second review m he claimed.

Sri Lanka’s economic reform program implemented by the Sri Lankan authorities is yielding the first signs of recovery with positive real GDP growth in the third quarter of 2023, low inflation, increased revenue collection, and a build-up of external reserves.

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