According to a spokesperson from the International Monetary Fund (IMF), the IMF is prepared to offer support to Sri Lanka in its discussions with international bondholders. The IMF will provide an official assessment once a preliminary agreement is reached between the parties involved. The spokesperson expressed the hope that an agreement that aligns with the IMF-supported program and the requirements of official creditors’ Comparability of Treatment can be achieved promptly, prior to completing the program’s second review.
Read more: Will Sri Lanka’s debt restructuring agreement facilitate access to IMF loan?
Earlier this week, Sri Lanka revealed that they had been unsuccessful in reaching a debt restructuring agreement with bondholders. The agreement involved approximately $12 billion. This raised concerns that the country may experience a delay in receiving the third tranche of its $2.9 billion IMF program in June. The government cited a key obstacle as the mismatch between the bondholders’ plan’s baseline parameters and those embedded in Sri Lanka’s IMF program.
The IMF statement encouraged both parties to continue their discussions expeditiously. Sri Lanka will engage in consultations with the IMF to evaluate whether the recent proposals discussed with bondholders adhere to the parameters of its bailout program. In May 2022, the island nation defaulted on its foreign debt, initiating negotiations with bilateral creditors several months later. Eventually, in November of the same year, Sri Lanka secured a preliminary agreement with China, India, and the Paris Club.
Following a significant decline in foreign exchange reserves in early 2022, Sri Lanka faced its most severe financial crisis since gaining independence from British colonial rule in 1948. This crisis left the country unable to meet essential expenses such as fuel, cooking gas, and medicine.
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