Finance Ministry updates creditors on measures taken so far to ensure debt sustainability

Thursday, 18 August 2022 00:30 - - {{hitsCtrl.values.hits}}

The Ministry of Finance, Economic Stabilisation and National Policies has prepared a presentation to update Sri Lanka’s creditors on the current financial situation.

The report, prepared solely for information purposes, said Sri Lankan authorities have decisively reacted to the unprecedented economic crisis, taking a series of challenging decisions aiming at restoring macroeconomic stability as promptly as possible.

From the outset of the crisis, Sri Lanka has called upon the IMF to provide financing to tackle the severe liquidity crisis and catalyse the restructuring process, according to the report.

The report highlights the measures taken by authorities to tackle the unprecedented crisis the country is facing.

Engaging with the International Monetary Fund to Secure a Program, Hiring Financial and Legal Advisors, Initiating the Design of an Economic Reform Program, Engaging with Bilateral Creditors, and notably to Secure Emergency Liquidity Credit Lines were among the measures taken.

As per the Debt Sustainability Analysis conducted by the IMF, Sri Lanka’s public debt has reached unsustainable levels, standing at 114% of GDP as at end 2021, of which 47% was denominated in foreign currency.

Sri Lanka is currently in active negotiations of a realistic macro-economic and fiscal framework with the IMF. This should lead to a Staff-Level Agreement in the coming weeks that will unlock the necessary financing to address the liquidity needs the country is currently facing.

The report to the creditors said although the process is highly dependent on the progress of an IMF program, the country has a clear view on the next steps in the restructuring process.

These include: Finalise discussions with the IMF to reach Staff-Level Agreement; Public Investor Presentation to update creditors on economic situation and process; Continue engagement with creditors and sharing of information; Continue engagement with creditors in order to obtain financing assurances; Reach IMF Board Approval and unlock additional much-needed multilateral financings; Negotiations of debt treatment with creditors included in the restructuring perimeter and Execution of the restructuring agreements.

Full report available at treasury.gov.lk/api/file/7d5398e3-d25f-4b97-8b32-0639d83f2e57.

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