COLOMBO - Sri Lanka has reached an understanding with a group of creditor nations to restructure approximately $5.9 billion in debt, a key step in its efforts to navigate out of its worst economic crisis in decades. This agreement follows an earlier deal concerning $4.2 billion owed to China's Export-Import Bank.
The International Monetary Fund (IMF) has signaled potential clearance of Sri Lanka's bailout review next month, which could unlock a subsequent tranche of around $334 million. This anticipated development comes after an October staff-level agreement on the bailout review, setting the stage for an executive board meeting expected in mid-December.
Sri Lankan Treasury Secretary Mahinda Siriwardana highlighted the importance of these steps toward fiscal health and economic recovery. Japan's top financial diplomat, Masato Kanda, has commended the accord as a model for other middle-income nations facing similar fiscal challenges. Notably, the creditor committee leading the restructuring efforts includes Japan, France, and India but lacks China as a formal participant.
Since its March IMF bailout of $2.9 billion, Sri Lanka has made progress by moderating inflation and rebuilding foreign reserves. The country aims to reduce its debt load by $16.9 billion through restructuring efforts and is actively seeking additional arrangements with bilateral creditors and bondholders.
Central Bank Governor P Nandalal Weerasinghe indicated that further potential assistance totaling around $900 million from global financial institutions may follow the anticipated release of IMF funds. These developments come as continued discussions are underway with bilateral creditors following a memorandum of understanding strategy, and efforts are being made towards settlements with bondholders who own most of Sri Lanka's international sovereign bonds.
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