IMF welcomes debt deal
The IMF has welcomed the announcement of Sri Lanka’s finalization of its debt agreements with its major official creditors. Peter Breuer, Senior Mission Chief for Sri Lanka has said that the finalization of the debt agreements is a key milestone and takes Sri Lanka one step closer towards completing its debt restructuring and restoring debt sustainability.
“We hope that there will be swift progress on reaching agreements with external private creditors in the near future,” Breuer told the media on Thursday.
On June 26, 2024, Sri Lanka concluded negotiations with the Official Creditor Committee (OCC) and China Exim Bank, marking pivotal strides towards stabilizing its financial footing amid recent economic challenges.
The agreements, valued at a combined USD 10 billion, encompass restructuring arrangements with major bilateral lenders under the auspices of the OCC, co-chaired by Japan, India, and France. Notable members of the committee include Australia, Austria, Belgium, Canada, Denmark, Germany, Hungary, Korea, the Netherlands, Russia, Spain, Sweden, the United Kingdom, and the United States of America.
2024/06/28 The Island
Sri Lanka seals debt deal with China, others after crash
Colombo (AFP) – Sri Lanka said on Wednesday it had clinched a restructuring deal with key bilateral lender China and other nations, covering up to $10 billion in debt, a critical step towards recovery after a 2022 financial crash.
The agreement is expected to revive stalled infrastructure projects, including a Japanese-funded airport expansion and a new mass transit light rail in the capital, President Ranil Wickremesinghe said.
Sri Lanka defaulted on its foreign debt in April 2022 after running out of foreign exchange, and the unprecedented economic crisis forced then-president Gotabaya Rajapaksa to step down.
"Sri Lanka concluded negotiations with the Official Creditor Committee (OCC) and the Exim Bank of China," Wickremesinghe said in a televised Sinhalese-language address to the nation.
"Sri Lanka won," he added in English while thanking the OCC, which included Japan, India, the United States, Canada and several European nations.
He said the deal with OCC nations was reached in Paris, while an agreement with the Exim Bank of China was signed in Beijing on Wednesday.
Sri Lanka secured a moratorium on repayments until 2028, he said, but gave no further details.
His supporters in the capital Colombo let off firecrackers and distributed milk rice in celebration as he spoke.
Wickremesinghe said the nation was bankrupt when he took over almost two years ago and he hoped the International Monetary Fund bailout of $2.9 billion he secured last year would be the island's last.
Colombo had gone to the IMF, the international lender of last resort, on 16 previous occasions and the debt restructuring is a condition of the IMF bailout.
Wickremesinghe has doubled taxes, removed generous energy subsidies and is set to sell off loss-making state enterprises to shore up state revenue under that deal.
Neighbouring India welcomed Sri Lanka's
deal and pledged more support.
"This milestone (agreement) demonstrates the strong progress made by Sri Lanka in stabilising its economy and moving towards reform and growth," the Indian government said in a statement.
Bilateral creditors account for 28.5 percent of Sri Lanka's outstanding foreign debt of $37 billion, according to treasury data from the end of March.
China accounts for $4.66 billion of a total of $10.58 billion borrowed from other countries.
Japan accounts for $2.35 billion and India for $1.36 billion.
The government said it was in talks with international bondholders but there was no agreement. A previous round of talks ended in deadlock in April.
Sri Lanka is unable to raise commercial loans until a deal with private creditors is struck.
However, the agreement with bilateral creditors allows the unfreezing of loans for ongoing infrastructure projects financed with funding from other countries.
Thousands of teachers from government schools went on strike in Colombo on Wednesday demanding higher pay, with police using water cannon and tear gas to disperse the protest.
Sri Lanka is due to hold a presidential election this year and opposition parties have vowed to renegotiate the terms of the IMF bailout.
The IMF's Sri Lanka mission chief Peter Breuer said the fund was willing to listen to alternative proposals from rival political parties, but said it was necessary to stick to the benchmarks set in the bailout.
Sri Lanka had made good progress but was not out of the woods yet, he said.
China Strikes Debt Deal With Sri Lanka, Cathing the IMF Off Guard
(Bloomberg) -- China reached a tentative debt agreement with Sri Lanka, front-running separate talks the International Monetary Fund and other creditors are holding with the South Asian nation and catching them by surprise.
The deal between Export-Import Bank of China and Sri Lanka was reached late last month, China’s Foreign Ministry said Tuesday, without providing details of the pact.
The IMF, Paris Club members including Japan, and other lenders like India are expected to hold talks this week in Morocco on a debt restructuring plan. China, which isn’t part of that official group even though it’s one of Sri Lanka’s biggest creditors, has been pursuing bilateral negotiations with the South Asian nation instead.
Peter Breuer, senior mission chief for Sri Lanka at the IMF, said while it was aware discussions were taking place with creditors, “we have not yet been informed about any specific agreements.” The multilateral lender would need to “assess the entire package of agreements in its totality to assess consistency with IMF debt targets,” he said.
Officials from two creditor nations, who asked not to be identified, said they weren’t informed about the terms and details of the China deal.
The preliminary pact is not expected to change efforts by the official creditor committee to try to reach a debt deal in Marrakech, which would include safeguards to prevent favorable payment terms to China, one of the people said.
An Indian official involved in the debt discussions said New Delhi has been pushing for equal and fair treatment in the restructuring plan, and hopes that all creditors are transparent in their approach.
Sri Lanka owes about 40% of its bilateral debt to China and 16% to India, according to estimates from the IMF. Reaching a deal quickly with its creditors will allow Sri Lanka to keep tapping funds from its $3 billion bailout program with the multilateral lender.
Sri Lanka’s central bank Governor Nandalal Weerasinghe and Junior Finance Minister Shehan Semasinghe are in Marrakech this week at the IMF and World Bank annual meetings. Semasinghe met with Robert Kaproth, deputy assistant secretary for the US Treasury, he said in a post on social media platform X, with the two discussing the IMF program and the debt restructuring process.
The official creditors committee was aiming to sign a memorandum of understanding with Sri Lanka at the Marrakech meeting without the participation of China, Bloomberg News reported last month. While nothing has been finalized yet, an announcement on that deal during the meetings this week is looking increasingly unlikely, according to people familiar with the situation, who asked not to be identified..
The Exim Bank deal comes a week before China hosts its third Belt and Road Forum in Beijing, a flagship program by President Xi Jinping that has faced criticism for burdening developing nations like Sri Lanka with debt.⍐
--With assistance from Anusha Ondaatjie, Ruchi Bhatia, Ramsey Al-Rikabi and Toru Fujioka.
, Oct 11, 2023
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