Sri Lanka awaiting assurances from India, China, says Central Bank Governor 

Only if the assurances come through will the country be elgible for the IMF’s Extended Fund Facility.

Sri Lanka is waiting for financing assurances from its bilateral creditors, including India and China, to tap support from the International Monetary Fund (IMF), according to Sri Lanka’s Central Bank Governor P. Nandalal Weerasinghe.

In September, the IMF reached a staff level agreement with Sri Lanka for a $2.9 billion package to help the island nation facing its worst economic crisis in decades. The development came months after Sri Lanka floated the rupee, opted for a preemptive default on its external debt, and increased interest rates sharply to tighten monetary policy.

The Hindu explains: The International Monetary Fund’s staff-level agreement with Sri Lanka

However, Sri Lanka must now obtain adequate financing assurances from its creditors, for the IMF Board to approve the promised Extended Fund Facility (EFF). Colombo is desperate for the $2.9 billion not because it is a big amount — it can barely meet two months’ worth of imports — but mainly to use the IMF package to qualify for more credit internationally, as the country struggles to recover from the dreadful economic crash that pushed citizens to the streets. Spanning months, the mass protests ousted the former Rajapaksa administration. President Ranil Wickremesinghe, who was elected through a parliamentary vote, has vowed to rebuild the island’s devastated economy, while repeatedly acknowledging the enormous challenge the task entails.  

Over the past few months, Sri Lanka has been in talks with China, Japan, and India — its three major bilateral creditors — to restructure the billions of dollars owed to them.  “We have shared all the information possible with our bilateral creditors, on an open, comparable, and transparent basis. Now they will have to look at it, make their decisions internally and come back to us…we hope they will do that soon,” he told The Hindu in an interview at his office on Tuesday. From the time the Sri Lankan government entered the provisional agreement with the IMF, India has underscored the need for “creditor equitability and transparency”, implying Colombo must not give any creditor preferential treatment while restructuring their loans.

Dragging debt talks in Sri Lanka put spotlight on Chinese loans

Although Sri Lanka aimed to secure IMF relief before the end of this year, but with bilateral negotiations dragging, it failed to. Talks with China got a “little delayed”, Governor Weerasinghe observed, citing “internal issues” such as the Chinese Communist Party (CCP)’s national congress held in October, and “COVID-19 restrictions” in China.