IMF board approval of SL loan likely by year’s end
Regardless of the government’s optimism in obtaining the International Monetary Fund (IMF) Board approval of US$2.9 billion Extended Fund Facility (EFF) for Sri Lanka in the first half of this year, the IMF says it is difficult to predict a timeline for the relevant approval.
President Ranil Wickremesinghe has stated that the government expects the IMF-EFF to be received in the first half-2023. India will announce its response regarding Sri Lanka’s debt restructuring before the end of this month, the President said adding that another round of discussion with China is underway,
Sri Lanka is in the final stages of providing a guarantee from the creditors to the IMF on debt restructuring, State Minister of Finance Shehan Semasinghe disclosed to the Business Times.
He said the local team of IMF negotiators has dealt with several identified issues including the stabilising of the economy that should be tackled in the short run.
In response to a Business Times query on the present status of the IMF EFF, Senior Mission Chief for Sri Lanka, Peter Breuer noted that the initial disbursement under the EFF is available after Board approval.
He said, “it is contingent on the implementation of prior actions by the authorities and the progress with discussions with creditors on restoring debt sustainability”.
The latter specifically requires receiving assurances from Sri Lanka’s official creditors to restore debt sustainability and the authorities making a good faith effort to reach a collaborative agreement with private creditors.
IMF Mission Chief for Sri Lanka. Masahiro Nozaki said, “It is difficult to predict the timeline for the Board approval, as the process of debt discussions takes time”. He pointed out that “all parties who are involved in the process should move expeditiously, so that Sri Lanka can emerge from the crisis as quickly as possible”.
Sri Lanka’s quick return to sustainable growth would help to mitigate the worsening humanitarian crisis and also help restore the country’s repayment capacity, he emphasised.
Meanwhile in a report, Standard Chartered Bank revealed that IMF board approval could happen in Q2-2023 (versus Q1 previously) given delays in securing financing assurances from bilateral creditors.
This could further delay negotiations with commercial creditors, which it expects will be pushed back to H2 and as a result that a restructuring deal to be reached only
by end-2023.
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