Sri Lanka has now engaged with all its official bilateral creditors as well as International Financing Institutions (IFIs) with a view to obtain financing assurances for debt restructuring, Finance Ministry sources revealed.
In practice, financing assurances from official bilateral creditors are obtained once each bilateral creditor (or all official bilateral creditors collectively) officially confirms its (or their) commitment to grant Sri Lanka a debt treatment compatible with the macroeconomic and debt sustainability frameworks supporting the IMF programme.
In this context, the Finance Ministry held a virtual investor presentation on October 23 with 637 registered attendees and it enabled the Sri Lankan authorities to provide an update on the ongoing process and the next steps related to the engagement with the IMF and the creditors.
Continuing this process, the authorities held a virtual meeting with Sri Lanka’s official creditors on Thursday which was chaired by Treasury Secretary K.M. Mahinda Siriwardana and Central Bank Governor P. Nandalal Weerasinghe.
Sri Lanka is likely to miss the December deadline for securing an IMF loan, as the main bilateral debtor, China had insufficient time for holding debt restructuring talks with the Sri Lanka government.
The next meeting of the IMF Executive Board is in March 2023 and therefore the consent of the Board is expected at that meeting.
Regarding prior actions, the authorities are working hand in hand with IMF staff to ensure that all prior actions are satisfied as soon as possible.
Sri Lanka is currently on track to complete all prior actions before yearend. Prior actions included parliament approval of a revised 2022 budget, revenue measures to support fiscal consolidation and annual budget for 2023 in line with the IMF programme.
The introduction of formula-based price adjustments for fuel and electricity, the introduction of a new Central Bank Act and amendments to the Banking Act to enhance the Central Bank’s powers, and measures to support prices and financial sector stability are to be introduced soon.
(Curtesy Sunday Times)