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Sri Lanka Optimistic about Debt Restructuring Progress, Eyeing IMF Financing

Sri Lanka expresses optimism regarding the resolution of debt restructuring issues in the second quarter, aiming to secure financing from the International Monetary Fund (IMF), as external creditors show positive engagement, as stated by the South Asian nation’s junior finance minister.

Shehan Semasinghe, the junior finance minister, mentioned on Thursday at the Boao Forum in Hainan, China, that discussions with Sri Lanka’s bondholders in London are anticipated to yield positive outcomes. He emphasized the significance of unlocking access to the tranche, citing its importance to Sri Lanka.

Moreover, Semasinghe highlighted that during productive bilateral discussions between Chinese leader Xi Jinping and Prime Minister Dinesh Gunawardena in Beijing this week, pledges were made to strengthen ties between Sri Lankan authorities and the Export-Import Bank of China and China Development Bank.

Although Sri Lanka recently obtained initial approval for a $337 million payout from the IMF, further progress on debt restructuring remains crucial for accessing the funding. The IMF has outlined the necessity for Sri Lanka to solidify a preliminary debt restructuring agreement with China ExIm and reach an in-principle deal with China Development Bank.

Additionally, the government is required to establish memorandums of understanding with official creditors, including India and the Paris Club, and secure a deal with its bondholders for the IMF’s board to approve the next tranche of the $3 billion bailout. Sri Lankan President Ranil Wickremesinghe has indicated the nation’s pursuit of relief from payments through 2027.

Semasinghe also disclosed Sri Lanka’s plans to introduce legislation to advance reforms that have facilitated the nation’s navigation through an unprecedented economic crisis and a historic debt default in 2022. He asserted that such measures would bolster confidence in the Sri Lankan economy and foster trust among all creditor nations.

Source: Bloomberg

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