Sri Lanka delegation to visit Washington for crucial IMF talks
Sri Lanka is preparing to resume discussions on the US $ 2.9 billion bailout programme with the International Monetary Fund (IMF) during the IMF and World Bank Group Annual Meetings in Washington later this month.
This comes after President Anura Kumara Dissanayake’s pledge to comply with the conditions of the agreement. These talks are vital for Sri Lanka’s ongoing efforts to recover from its severe economic crisis in 2022.
The IMF has reaffirmed its commitment to supporting Sri Lanka’s economic reform initiatives and plans to closely collaborate with the country’s economic team.
A date for the third review of the IMF-supported programme will be set following Sri Lanka’s general election in November 2024.
The Sri Lankan delegation to Washington will be led by Central Bank Governor Nandalal Weerasinghe, Treasury Secretary Mahinda Siriwardana, and other key officials, although the final list is still being finalised. Their primary goal is to focus on stabilising and fostering the growth of Sri Lanka’s economy through global financial cooperation.
The 2024 Annual Meetings of the IMF and World Bank Group will take place from October 21 to October 26, with ministerial sessions and key events during October 22-25. The plenary session, along with meetings of the Development Committee and the International Monetary and Financial Committee, will be the main highlights of the gathering.
The Ministry of Finance recently announced that its discussions with the IMF and the Official Credit Committee ended successfully, indicating that policy changes are unlikely to disrupt the IMF programme or the debt treatment agreement from the previous administration.
This agreement ensures fair treatment among official creditors and bondholders, in line with the IMF-supported programme’s terms.
Sri Lanka’s government has endorsed the debt targets and aims to expedite the restructuring of International Sovereign Bonds (ISBs) according to the agreed conditions, a move that seeks to stabilise the nation’s economic standing and enhance debt management.
Despite these steps, concerns persist about the debt restructuring plan. Groups like the UK-based Debt Justice and
Sri Lankan advocacy organisations have raised warnings about the long-term risks of the ISB treatment, fearing that debt servicing will consume over 25 per cent of
Sri Lanka’s government revenue for years.
They argue that this burden could keep Sri Lanka locked in a cycle of debt dependence, limiting its financial flexibility.
According to a Fitch Ratings press release dated Wednesday 09, the success of Sri Lanka’s debt restructuring efforts is critical to economic stability and restoring its credit standing.
While Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) remains at ‘RD’ (Restricted Default), the Long-Term Local-Currency IDR was upgraded to ‘CCC-’ in September 2023, signaling progress in domestic debt management.
However, the country’s total debt remains significant, with projections suggesting a slow decline in the debt-to-GDP ratio to about 103 per cent by 2028, down from 116 per cent in 2022, contingent on the successful implementation of the restructuring.
The parliamentary elections on November 14 are expected to play a key role in shaping the new government’s ability to carry out these economic reforms. Political stability resulting from the elections will be essential for Sri Lanka to meet its financial commitments and make sustained progress toward economic recovery.
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