Sri Lanka’s efforts to achieve debt restructuring, which is required to obtain an IMF facility, are becoming increasingly difficult due to the country’s inability to reach an agreement with creditors.
Many politicians, economists, nevertheless have repeatedly emphasised the need for an IMF facility to help Sri Lanka overcome its current economic crisis. Sri Lanka has failed in this endeavour.
. During his recent visit to the island, India’s foreign minister assured that they would provide their corporation for the debt restructuring process. In this context, China issued a similar assurance on January 24th.
Despite Chinese assurances to Sri Lanka, it is unclear whether the country meets the IMF’s specifications, as highlighted by economist experts.
Recently, India sent a special letter to the IMF stating that it will support the restructuring of Sri Lanka’s debt, but that all creditors must agree to a set of similar covenants.
The letter states, ‘We acknowledge Sri Lanka’s deeply unsustainable debt situation and the recent efforts of the Sri Lankan authorities to engage their official and commercial creditors for a solution to restore debt sustainability under IMF financing’.
It further stated that ‘We hereby confirm our strong support for Sri Lanka’s future EFF-supported program and project IMF staff to commit to providing financial and credit relief to Sri Lanka in line with the restoration of Sri Lanka’s public debt sustainability under the IMF-sponsored programme. Ensures that the program is fully funded as available and this financial/credit facility is provided by the Export-Import Bank of India.”
‘In this context, we are committed to continuing discussions with the Paris Club as well as the Government of Sri Lanka for a medium to long-term debt restructuring through extending debt maturities and reducing interest rates or any other financial operations that provide similar financial and debt relief. India has informed the International Monetary Fund.
India further asserts that the Sri Lankan authorities expect adequate financial contributions from all commercial creditors and other official bilateral creditors as well as multilateral development banks to achieve equitable debt restructuring.
India has said that we are ready to support your efforts for this.
“We look forward to continuing cordial and in-depth discussions with the Sri Lankan authorities, the IMF and the Paris Club in the coming weeks to finalize the specifics of this financial debt relief.”
Source: BBC Sinhala website