Sri Lanka’s debt restructuring likely to be complete by September: IMF

Colombo: The IMF has expressed hope that Sri Lanka’s debt restructuring process would be completed by September, which is also the time for the global lender’s formal review of the bailout facility it extended to the cash-strapped nation, a senior IMF executive said on Monday.

The International Monetary Fund (IMF) has recently extended a nearly USD 3 billion bailout facility to debt-ridden Sri Lanka that would help stabilise the country’s economy after it was jolted by a devastating economic crisis last year.

“The IMF is hopeful that Sri Lanka’s debt restructuring process would be completed by September which is the time for the first review,” Krishna Srinivasan, the IMF’s director for Asia Pacific, told reporters.

A team of the IMF is currently in the country assessing the progress made since the agreement reached on March 20 for a nearly USD 3 billion bail-out facility over a period of 4 years.

“The expectation is that restructuring is completed by the time of the first review. To that end, the government is making a good faith effort in negotiating with all creditors, official and private,” Srinivasan said.

He said that the IMF was not getting involved in the domestic debt restructuring process.

Srinivasan further said that anti-corruption and governance reforms were needed to ensure people benefit from reforms envisaged in the IMF programme.

“Sri Lanka is the first country in Asia that has undergone the IMF governance diagnostic exercise,” he said.

The governance diagnostic report is expected to be published by September.

Srinivasan said it was essential for Sri Lanka to continue the reform programme.

“The country was in crisis and ambitious reforms were needed, and they should be pursued. The economic impact of the reforms on the poor and vulnerable needs to be mitigated with appropriate measures,” he said.

Commenting on the IMF team’s visit that will last until May 23, Peter Breuer, the Sri Lanka head of the IMF, said: “We are engaging with the government to update our knowledge to find out what is the state of affairs to the extent any corrective action is needed”.

According to official figures, Sri Lanka’s total debt is USD 83.6 billion, of which foreign debt amounts to USD 42.6 billion and domestic debt amounts to USD 42 billion.

In April 2022, Sri Lanka declared its first-ever debt default, the worst economic crisis since its independence from Britain in 1948, triggered by forex shortages that sparked public protests.

Months-long street protests led to the ouster of the then-president Gotabaya Rajapaksa in mid-July. Rajapaksa had started the IMF negotiations after refusing to tap the global lender for support.