• Wickremesinghe says two alternative targets are December and January
• Priority is obtaining financing assurance from bilateral creditors 
• CBSL Chief says post-evaluation IMF can start disbursing money whilst finalisation of external restructuring exercise continues

The Government on Friday expressed confidence in timely receipt of crucial support from the International Monetary Fund (IMF) and external debt restructuring and though the two are connected, the disbursement of funds from the former is likely amidst finalisation of the latter. 

“We have two alternate targets – December and January,” President and Finance Minister Ranil Wickremesinghe told a packed and interactive post-Budget forum organised by the Daily FT and the Colombo University MBA Alumni Association. 

He said China and India have not gone into debt restriction before so Sri Lanka needs to give some space to them. “It was decided with China that we start the discussions after the party congress is over in October and we are trying to start discussions soon. We are trying our best to conclude it and have it before the Board meeting in December. Otherwise, we have to go for January,” the President said.  

“We have to finalise the negotiations with India and China, while Paris Club has already agreed to it (debt restructuring). The IMF Staff-Level has agreed and going into the private creditors will not be problematic. It is going to take a bit of time to negotiate. 

“Other than that, we hope the rest of the roads will be smooth travelling,” emphasised Wickremesinghe in response to questions on timeline of the IMF Executive Board approval for $ 2.9 billion four-year Extended Fund Facility program for Sri Lanka. 

Opposition MP Patali Champika Ranawaka last week claimed that in his opinion, Sri Lanka which was late to seek IMF support would only get its Executive Board approval and release of the first tranche in the second quarter of 2023. 

Central Bank Governor Dr. Nandalal Weerasinghe who figured with President Wickremesinghe in the panel comprising the Treasury Secretary and Sri Lanka heads of the World Bank and Asian Development Bank among others, said the priority is to obtain financing assurance from the bilateral creditors. 

“We also need to negotiate with commercial creditors. Then the IMF can evaluate and start disbursing money as mentioned by the President in December or January,” Weerasinghe said. 

“The restructuring and finalising it can take place after the IMF disburses money. Thereafter, we have another six months of full process with bilateral and commercial creditors,” CBSL Chief added.

Sri Lanka on 12 April suspended servicing of all external debt. At the end of  June 2022 Sri Lanka had $ 46.6 billion in foreign currency denominated debt or 70% of GDP, up from 54% by end of 2021. China accounts for 52% or $ 7.3 b of bilateral debt followed by Japan and India. Separately, the outstanding International Sovereign Bonds placed with private creditors was $ 19.2 billion as at end June 2022.

In terms of the reserves, Weerasinghe said Sri Lanka needs to build up to a comfortable level from where it is now. “With confidence coming back into the system, we anticipate the FDI, and portfolio investors’ inflows will come in. We hope that we can reach the reserve levels we had in 2019. We are hopeful that the IMF program will stabilise currency and inflation,” CBSL Governor said.

 

No need to panic, trying to avoid  domestic debt restructuring: President