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Sri Lanka to get 6-year moratorium on debt owed to India, Paris Club

March 22, Colombo, LNW: In the wake of IMFs call for Sri Lanka to finalize the agreements with the official creditors and reach Agreements in Principle with the main external private creditors the government is close to finalising a debt treatment plan with India and the Paris Club, sources familiar with the negotiations said, pointing to a likely moratorium of up to six years and a reduced interest rate during the repayment period.

Peter Breuer, IMF Senior Mission Chie told a media briefing on Thursday 21, “The critical next steps are to finalize the agreements with the official creditors and reach Agreements in Principle with the main external private creditors in line with program parameters in a timely manner. This should help restore Sri Lanka’s debt sustainability over the medium term

“The discussions are at an advanced stage. A formal agreement on the terms can be expected very soon,” the Colombo-based source said after a recent discussion among members of the Official Creditor Committee [OCC].  

Breuer clarified that delays in finalizing agreements with official creditors haven’t been flagged as a concern. He acknowledged that converting agreements in principle into formal agreements can take time. However, he emphasized the importance of this process for solidifying debt relief efforts.

Sri Lanka is close to finalising a debt treatment plan with India and the Paris Club, sources familiar with the negotiations said, pointing to a likely moratorium of up to six years and a reduced interest rate during the repayment period.

“The discussions are at an advanced stage. A formal agreement on the terms can be expected very soon,” the Colombo-based source said after a recent discussion among members of the Official Creditor Committee [OCC].  

As many as 17 countries that have extended loans to Sri Lanka formed the Committee last year for ease of debt restructuring negotiations. China opted to stay out of the platform, but has been attending its meetings as an observer. 

Meanwhile, Colombo has repeatedly assured the OCC that it would negotiate repayment of Chinese loans on comparable terms.

Finalising agreements with the official creditors and reaching “in principle” agreements with the key private creditors would be “critical next steps” in Sri Lanka’s economic recovery plan, the International Monetary Fund (IMF) said on Thursday. 

Authorities reached a staff-level agreement with the Fund on the second review of its four-year Extended Fund Facility (EFF) arrangement. Upon completion of the IMF Executive Board’s review, Sri Lanka would have access to about US$337 million, taking IMF assistance it has received so far to US$1 billion, the Fund said in a statement.

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