Sri Lanka in final talks with IMF about $2.9-bn package: Wickremesinghe

Sri Lanka is in the final stages of negotiations with the International Monetary Fund (IMF) regarding the much-awaited $2.9-billion bailout package, President Ranil Wickremesinghe said on Thursday (February 9). The package can help the debt-trapped island nation recover from the unprecedented economic crisis.

Wickremesinghe added that his government was having “direct discussions” with Beijing to restructure the country’s debts with China.

The IMF in September last year approved the $2.9-billion bailout package for over four years, pending the island nation’s ability to restructure its debt with creditors — both bilateral and sovereign bond holders.

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By the end of June 2022, Sri Lanka owed nearly $40 billion to bilateral, multilateral, and commercial loans, according to the figures released by the Sri Lankan Treasury.

With assurances from creditors, the $2.9-billion package could get the IMF board approval in March, officials said. It would help Sri Lanka obtain bridging finance from markets and other lending institutions, such as the ADB and the World Bank.

India’s support

“We are in the final stages of negotiations with the IMF. India has agreed to debt restructuring and extended financial assurance. We are in direct discussions with China. The Paris Club announced its support. The international support is a sign that we are on the right track,” Wickremesinghe tweeted on Thursday.

Last month, India’s finance ministry issued a letter to the IMF confirming its support to Sri Lanka on the issue of debt restructuring.

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Subsequently, External Affairs Minister S Jaishankar, during his visit to Sri Lanka, also announced India’s assurances to Sri Lanka for the bailout package.

Sri Lanka also completed its debt restructuring talks with Japan, its other big creditor, last month.

Inflation down

Wickremesinghe, who is also Sri Lanka’s finance minister, said the inflation level, which was 70 per cent when he took over as the president in July last year, has now dropped to 54 per cent as of January 2023.

“When I first addressed parliament as President, inflation stood at 70%. It’s now down to 54%. Exports have risen to $13b; imports are down to $18b; remittances are up to $4b. Foreign reserves are up to $500m,” he tweeted a day after making a policy statement in Parliament.

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Sri Lanka was hit by an unprecedented financial crisis in 2022, the worst since its independence from Britain in 1948, due to a severe paucity of foreign exchange reserves.

It sparked a political and humanitarian crisis in the country, which led to the ouster of the all-powerful Rajapaksa family.

(With agency inputs)