Debt Agreements
Sri Lanka got rid of the IMF and signed debt agreements with China. It surprised the International Monetary Fund (IMF) as Sri Lanka signed the preliminary debt agreements with the Exim Bank of China.
It’s worth noting that the IMF and other creditors are holding separate discussions with Sri Lanka regarding debt agreements.
In late September, the Export-Import Bank of China, as an official creditor, tentatively agreed with Sri Lanka on the debt treatment.
China’s foreign ministry announced this development. Neither Sri Lanka nor China’s Foreign Ministry announced the quantum of Chinese loans for Sri Lanka.
The IMF and creditors like Japan, the US, and India are holding discussions this week in Morocco on a debt restructuring plan without China’s participation.
Peter Breuer, the senior mission chief for Sri Lanka at the IMF, mentioned that while they were aware of discussions with creditors, they had not received information about specific agreements.
The IMF would need to evaluate the entire set of agreements to ensure they align with IMF debt targets.
It’s anticipated that this agreement will not alter the efforts of the official creditors’ committee to reach a debt deal in Marrakech. It would include safeguards to prevent preferential payment terms to China.
Sri Lanka’s central bank Governor Nandalal Weerasinghe and Junior Finance Minister Shehan Semasinghe are currently in Marrakech. They are attending the IMF and World Bank annual meetings, aiming to reach an agreement with creditors and foreign bondholders.
Creditors were seeking to sign a memorandum of understanding with Sri Lanka during the meeting, excluding China’s participation.
The agreement with the Exim Bank comes just before China hosts its third Belt and Road Forum in Beijing next week. It is a flagship program by President Xi Jinping that has faced criticism for burdening developing nations like Sri Lanka with debt.
China accounts for approximately 52% of Sri Lanka’s bilateral debt. A swift agreement will enable the South Asian nation to continue accessing funds from its $3 billion IMF bailout program.
Earlier, in recent days, the value of the Sri Lankan has recovered sharply after the executive board of the IMF approved a $3 billion bailout package for the default-hit country.
The IMF board approved the loan for Sri Lanka on March 20, and the first tranche of the loan will be released in a day or two.
On Friday, the dollar-Sri Lankan rupee exchange rate reversed to 326 rupees as the country is set to receive a much-need bailout package from the IMF.
In April last year, Sri Lankan government announced default saying it was not in a position to pay back $51 billion in foreign loans.
