IMF praises Sri Lanka’s debt management with China’s Exim Bank

Amid its financial challenges, Sri Lanka has received commendation from the International Monetary Fund (IMF) for its handling of debt negotiations with China’s Export-Import Bank, a move that is pivotal for the country’s debt restructuring efforts and economic recovery. Peter Breuer, a representative from the IMF, highlighted the importance of the agreement involving approximately $4.2 billion in debt. This accord is crucial for the continuation of Sri Lanka’s fiscal reforms and for securing further support from international creditors.

The IMF is currently awaiting assurances from various creditor groups, including the Official Creditor Committee, to advance the review of Sri Lanka’s Extended Fund Facility (EFF) program. The review by entities such as the IMF Executive Board is a necessary step before proceeding with the next phase of economic support.

On October 11, 2023, Sri Lanka’s Ministry of Finance had announced reaching a principal understanding on debt terms with the Exim Bank of China. This development followed an agreement reached in late October 2023 between the IMF and Sri Lanka on economic policies for the first phase of the EFF review. This consensus set the stage for Sri Lanka to potentially access Special Drawing Rights (SDR) equivalent to $330 million upon approval by relevant authorities and contingent on engaging bondholders and other commercial creditors.

Breuer’s endorsement underscores international efforts to assist Sri Lanka in stabilizing its economy and managing its complex financial situation. The support from major creditors like China’s Exim Bank is seen as laying a foundation for sustained economic recovery and stability in Sri Lanka.

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