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Sri Lanka Races Against Time to Secure Agreements with Creditors Ahead of IMF Tranche

According to sources from the Daily Mirror, Sri Lanka is under immense pressure to finalize agreements with creditors, including bondholders, before June, when the third tranche of the International Monetary Fund (IMF) extended fund facility is anticipated.

The island nation is slated to receive the next tranche of US $337 million in June following the third review of the program. Prior to that, Sri Lanka must sign a Memorandum of Understanding (MoU) with the Paris Club of Nations for restructuring bilateral debts, along with a separate agreement with China, both on terms acceptable to all bilateral creditors.

In response to inquiries about recent developments, a government source stated that the government aims to conclude agreements in principle with commercial creditors, including bondholders, before the deadline.

Adding to the urgency, the presidential election is scheduled to take place later this year. The Election Commission is expected to issue the gazette notification calling for the election by the end of June, further complicating the government’s efforts to finalize the debt restructuring process.

Sri Lanka declared bankruptcy in April 2022, subsequently defaulting on payments amounting to US $6 billion. The government aims to settle 37% of debts within the first six years after the resumption of debt servicing, with 51% within 6 to 20 years, and the remaining 12% after 20 years.

Cabinet spokesman Minister Bandula Gunawardane affirmed that regardless of the election outcome, debt servicing will proceed according to the approved plan.

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