Sri Lanka is hopeful that the first tranche of the IMF disbursement will be available before the end of 2022, but it depends on cooperation from the creditors and assurances, revealed Central Bank Governor Dr. Nandalal Weerasinghe on Friday (23).
He was speaking at an update to creditors organized by Clifford Chance and Lazard, the heavyweight financial and legal advisers selected by Sri Lanka for its debt restructuring process.
Central Bank Governor Dr. Nandalal Weerasinghe on Friday (23) said that the perimeter of Sri Lanka’s debt exercise is still being considered, with the assistance of Clifford Chance and Lazard, while the issue of domestic debt is being looked at very carefully given the impact it may have on the stability of Sri Lanka’s banking sector, and the over all macro fiscal framework.
Noting that political reform was not a requirement from the IMF for the assistance, the Governor went on to note that there were two key elements noted in the program, addressing corruption vulnerabilities and medium-long term growth reforms.
The Central Bank Governor said that before the IMF program is in place, Sri Lanka must obtain financial assurances from bilateral creditors, and on the SOE debt is under consideration for the restructuring process as well.
“We are in discussion with the IMF on how best we can deal with government guarunteed SOE debt. We have several proposals that we have discussed, but nothing is final,” said the Central Bank Governor.
The IMF does not lend to countries whose debt is deemed unsustainable, requiring Sri Lanka to undertake an upfront comprehensive debt treatment. In practice, this requires financing assurances to be given by the bilateral creditors, resulting in a sufficient level of comfort to the IMF that bilateral creditors will support Sri Lanka’s efforts to restore public debt sustainability.