The International Monetary Fund (IMF) said on June 27 that Sri Lanka’s agreements with China and other creditor nations to restructure about US$ 10 billion in bilateral debt took the island nation a step closer towards restoring debt sustainability. “We hope that there will be swift progress on reaching agreements with external private creditors in the near future,” IMF’s Senior Mission Chief for Sri Lanka Peter Breuer said in a statement.
Sri Lankan officials in Paris inked the agreement with the Official Creditor Committee (OCC) co-chaired by Japan, India and France that have lent a combined US$ 5.8 billion. A separate agreement was signed with China’s EXIM Bank in Beijing to rework US$ 4.2 billion to ensure comparability of treatment. The restructuring of bilateral debt agreements was one of the key conditions set by the IMF under a US$ $2.9 billion bailout program that helped Sri Lanka tame inflation, stabilise its currency, and improve Government finances. Sri Lanka’s total external debt is US$ 37 billion.
US Ambassador Julie Chung welcomed the news of a final agreement on debt restructuring between Sri Lanka and creditor nations on the sidelines of the Paris Forum 2024.
In a post via ‘X’ she said: “This is a positive step forward in Sri Lanka’s economic recovery and resilience, helping build more confidence in Sri Lanka’s fiscal environment. The US encourages Sri Lanka to continue the reform process, adopting transparent and sustainable changes that foster long-term prosperity and growth.”
The U.S. Ambassador also said that though there is a long way to go, the implementation of the IMF program and the current reforms that are taking place too are praise worthy. While implementing short term reforms the country must also look at long term plans towards having permanent stability.”
The Chinese Embassy in Colombo announced a significant milestone in the debt restructuring process. Chinese Ambassador Qi Zhenhong signed a crucial Government Concessional Loan Agreement, marking a notable contribution to Sri Lanka’s debt restructuring efforts. The Embassy congratulated the Sri Lankans on this achievement, underscoring the strong ties and cooperation between the two nations.
“Chinese Ambassador, Qi Zhenhong signed the vital Government Concessional Loan Agreement. Great contributions to Sri Lanka debt restructuring. Congratulations to Sri Lankan People!” the Chinese Embassy release stated.
“Japan stands by Sri Lanka in support of the debt restructuring negotiation process so that Sri Lanka can reach the final agreement with the IMF,” Ambassador Hideaki Mizukoshi told an interview with foreign media based in Sri Lanka. “Japan intends to play a constructive role with other creditor countries, including China and India,” Mizukoshi said. Although Japan will support the debt negotiation process, Mizukoshi said that the expected talks on large infrastructure projects will only be resumed after Sri Lanka’s economy fully recovers. “In the future, when this economic crisis is over and the economic conditions are in good shape, we can restart that kind of discussion,” he told the media.
A news release from the Indian High Commission in Colombo stated, “As one of the Co-Chairs of the OCC, along with France and Japan, India has been steadfast in its commitment to the stabilisation, recovery and growth of Sri Lanka’s economy.
This was also demonstrated by India’s unprecedented financial support of USD 4 billion to Sri Lanka. India was also the first creditor nation to convey financing assurances to IMF which paved the way for Sri Lanka to secure the IMF program. India will continue to support Sri Lanka’s economic recovery including by promoting long-term investments in its key economic sectors.”
