IMF expects Sri Lanka to finalize deals with creditors soon

Lotus tower in Colombo, Sri Lanka

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The International Monetary Fund (IMF) believes Sri Lanka will soon finalize agreements with external commercial creditors that align with program goals.

“So overall we assess that there has been sufficiently strong progress on the debt restructuring front,” stated Julie Kozack, Director of the IMF Communications Department, during a press briefing on Thursday (June 6).

On March 21st, the IMF and Sri Lankan authorities reached a staff-level agreement on economic policies to complete the second review of the economic reform program and the 2024 Article IV Consultation.

Kozack confirmed that the IMF Executive Board will meet on June 12th to discuss Sri Lanka’s second review and the Article IV Consultation.

“In Sri Lanka, we do see macroeconomic policy reform starting to bear fruit.” She highlighted positive outcomes such as rapid disinflation, robust reserve accumulation, and early signs of economic growth, while maintaining financial system stability.

The IMF noted strong program performance, with most requirements for the second review met or implemented with some delays, and ongoing reforms in certain areas.

“The next steps on the debt restructuring are indeed to conclude negotiations with external commercial creditors and to implement agreements in principle with the official creditors. The domestic debt operations are largely completed. Debt restructuring discussions are continuing.”

Kozack mentioned that authorities have had extensive talks with external official creditors about an MOU with the official creditor committee and final agreements with the Export-Import Bank of China. Discussions with external bondholders are ongoing, aiming for agreements in principle soon, and negotiations with the China Development Bank are also advanced.

“There is a strong expectation that agreements with external commercial creditors consistent with program parameters will be reached soon. So overall we assess that there has been sufficiently strong progress on the debt restructuring front.”