The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, says the debt situation in Sri Lanka is no longer sustainable.
Speaking at the Global Center on Adaptation’s Africa Adaptation Summit, the IMF chief said that in many countries, fiscal space is gone, and the debt situation for 25 percent of emerging markets is no longer sustainable.
“Just think of Sri Lanka and many countries that are in a similar position. We even see a country with strong fundamentals like Ghana in a situation where it is harder to access markets because of exogenous shocks. And among poorer countries, over 60 percent are in or at risk of debt distress,” she added.
Georgieva had recently tweeted saying she was pleased with a deal reached with the IMF to support Sri Lanka.
“Very pleased that IMF staff and Sri Lankan government officials have reached a staff-level agreement to support the country’s economic policies with a 48-month Extended Fund Facility of about US$2.9 billion. This is an important step forward for Sri Lanka,” she tweeted recently.
An International Monetary Fund mission led by Peter Breuer and Masahiro Nozaki visited Colombo from August 24 to September 1, 2022 to continue discussions on IMF support for Sri Lanka and the authorities’ comprehensive economic reform program.
The IMF staff and the Sri Lankan authorities reached a staff-level agreement to support Sri Lanka’s economic policies with a 48-month arrangement under the Extended Fund Facility (EFF) of about US$2.9 billion.
The objectives of Sri Lanka’s new Fund-supported program are to restore macroeconomic stability and debt sustainability, while safeguarding financial stability, protecting the vulnerable, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.
Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps.
Financing assurances to restore debt sustainability from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors are crucial before the IMF can provide financial support to Sri Lanka.
(Curtesy Colombo Gazette)
