China has sent assurances backing IMF programme, Ranil tells Parliament

China’s pending assurances had proved a bottleneck in Sri Lanka’s ongoing attempt to urgently secure the Fund’s support to recover from last year’s financial meltdown

Sri Lanka has received China’s much-awaited financing assurances, President Ranil Wickremesinghe told Parliament on Tuesday, expressing hope that it would unlock the International Monetary Fund (IMF)’s promised $2.9 billion package by the end of the month.  

China’s pending assurances had proved a bottleneck in Sri Lanka’s ongoing attempt to urgently secure the Fund’s support to recover from last year’s financial meltdown. After receiving the assurance from the Exim Bank of China Monday night, the President and the Governor of Sri Lanka’s Central Bank signed the letter of agreement and forwarded it to the IMF. “Now our duties are done. I hope that before the end of this month, by the fourth week, the IMF will do its duty. After that we get the first round of money from the World Bank and ADB [Asian Development Bank],” Mr. Wickremesinghe said, terming the likely IMF agreement one of “special importance”.  

Later on Tuesday, the IMF acknowledged China’s assurances in supporting Sri Lanka’s debt restructure process. Krishna Srinivasan, Director of Asia and Pacific Department of IMF said in a statement: “Sri Lanka has now received financing assurances from all major bilateral creditors. This paves the way for consideration by the IMF’s Board on March 20 the approval of the Staff Level Agreement reached on September 1, 2022 for financing under an Extended Fund Facility.” Approval by the Board would also “catalyse financing from other creditors”, and “help Sri Lanka emerge from its current crisis and set it on a trajectory of strong and inclusive growth,” he said. 

While the IMF is yet to officially confirm receipt of China’s assurances, the development is significant for those in Sri Lanka who have pinned their hopes on the IMF to kickstart Sri Lanka’s economic recovery process. The Fund had made its support contingent on adequate financing assurances from Sri Lanka’s top bilateral creditors. While India and Japan, through the Paris Club group of creditors, had sent their assurances earlier this year, China took longer to come on board. Sri Lanka’s Foreign Minister Ali Sabry recently told  The Hindu in an interview that China’s offer until now was not compatible with the IMF’s requirements, and that Colombo was trying to “narrow the gap”. Following President Wickremesinghe’s announcement on Tuesday, Mr. Sabry thanked China in a tweet, for “paving the way” for IMF support, and termed the move a “milestone” in Sri Lanka’s path to economic recovery.     

Mr. Wickremesinghe invited the political opposition in Parliament to join his government’s efforts to “stabilise the country’s economy”. “After accomplishing this, we can decide on holding the presidential election and general election. The country would take this decision. Until then, I am asking you if you are ready or not. You can accept this, or reject it,” he said.  

Meanwhile, Sri Lanka’s Election Commission, which earlier postponed the local government elections due to the “lack of funds”, on Wednesday announced April 25 as the new date. The announcement comes days after the island nation’s Supreme Court asked authorities not to withhold funds needed for the polls. The Wickremesinghe government also came under fierce criticism from the opposition that accused him of “postponing polls and crushing democracy”.