Sri Lanka present economic woes, debt structuring plans to creditors

Colombo: Sri Lanka on Friday will unveil its economic woes, debt restructuring plans and an agreement it has reached with the International Monetary Fund (IMF) to external creditors to help it recover from an ongoing economic crisis, the worst since the island nation gained independence in 1948.

Officials from the Central Bank of Sri Lanka, senior officials from the Ministry of Finance and his legal advisers, Clifford Chance, will conduct the virtual presentation for all creditors. including India and Japan, which hold around $4.9 billion in Colombo debt.

The presentation comes a day after 16 diplomats and six missions who joined virtually from New Delhi assured Sri Lanka that the country would receive support to overcome the severe financial crisis.

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“The foreign ambassadors have pledged their support to President Ranil Wickremesinghe to secure Sri Lanka’s IMF assistance to recover from the economic crisis,” the Presidential Office said after Thursday’s Ambassadors’ Forum on Debt Restructuring and the IMF Program.

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The envoys, members and non-members of the Paris Club, expressed their confidence that Sri Lanka would be able to emerge from the dire situation, the office added.

The Paris Club is made up of a group of officials from major creditor countries who have welcomed the staff agreement between Sri Lanka and the IMF for a 48-month plan under an expanded fund facility to restore macroeconomic stability and debt sustainability.

Earlier this month, the Office of the President announced that the Paris Club would also coordinate with bilateral creditors outside the Paris Club to ensure financial security for Sri Lanka.

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Also in September, Sri Lanka finalized a tentative agreement with the IMF to receive $2.9 billion in loans over four years, but disbursement is subject to the country’s creditor agreeing to the debt restructuring.

India, Sri Lanka’s closest neighbor, which has offered nearly $4 billion in financial aid since January, has enlisted other countries’ support for the island amid three decades of war, the April 2019 Easter Sunday attack, the Covid-19 pandemic and a political crisis that blocked its main sources of foreign income such as tourism, foreign labor and exports.

“We continue to support Sri Lanka in all possible ways, particularly by encouraging long-term investments from India in key economic sectors in Sri Lanka for its early economic recovery and growth,” the Indian High Commission said on Tuesday.

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“India has also lobbied other bilateral and multilateral partners for swift support for Sri Lanka in its current economic difficulties. We also noted the completion of a staff agreement between the IMF and the Government of Sri Lanka. Its further approval within the IMF depends, among other things, on Sri Lanka’s debt sustainability.”

Sri Lanka defaulted on its debt in April amid a severe financial crisis that resulted in shortages of essential necessities such as food, fuel and medicines, as well as hours of power outages.

People from all walks of life took to the streets in protest, triggering the resignation of the cabinet led by former Prime Minister Mahinda Rajapaksa in July.

Former President Gotabaya Rajapaksa also fled the country.

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