The International Monetary Fund said its approval for a $2.9 billion loan to bail out crisis-riddled Sri Lanka will depend on the island nation securing assurances on debt relief from its bilateral creditors.
“Sri Lanka continues to engage with official bilateral creditors to obtain financing assurances and also continues to advance domestic reforms,” an IMF spokesperson said in a statement on the progress of its Extended Fund Facility to the South Asian nation.
“As soon as adequate assurances are obtained and remaining requirements are met, including by the Sri Lankan authorities, the EFF arrangement for Sri Lanka can be presented to the IMF’s Executive Board for approval.”
The Paris Club – an informal group of rich western creditors — and India have provided formal support to the multilateral lender for the loan recast, leaving China — Sri Lanka’s biggest lender — as a holdout. China, which accounts for about 52% of the bankrupt nation’s bilateral debt, has instead offered term extensions, while urging others to adopt a similar approach.
Access to funds will boost foreign-currency reserves that are barely above $2 billion and help the nation curb sky-high inflation, steer its $81 billion economy toward recovery after facing the worst recession since independence.
Sri Lanka has about $50 billion in foreign currency debt, of which about $10 billion is mainly split between China, Japan and India, according to government data as of December.