India writes to IMF backing Sri Lanka’s debt restructuring plan
The International Monetary Fund (IMF) was notified on Tuesday by India that it will endorse Sri Lanka’s initiative for restructuring its debt.
As per a source with firsthand knowledge of the matter, India made the commitment as the island nation pursues a 2.9 billion dollar rescue from the international lender.
The 22-million-population country is undergoing its gravest economic turmoil since attaining independence from Britain in 1948.
Throughout the past year, policymakers have also encountered numerous obstacles, including a scarcity of dollars, soaring inflation, and a profound recession.
“India has communicated with the IMF,” the source disclosed to Reuters, asking to remain unnamed as they are not permitted to speak to the press.
A representative for India’s finance ministry refrained from commenting, while Sri Lanka’s finance ministry did not promptly acknowledge a request for a statement.
New Delhi’s support emerged at a pivotal moment for Sri Lanka as it must organize its heavily indebted public finances to access the IMF loan that was agreed upon in September.
Sri Lanka owes India approximately 1 billion dollars, which will be included in the debt restructuring strategy, the source mentioned.
New Delhi also independently provided Sri Lanka with around 4 billion dollars in rapid assistance from January to July last year, encompassing credit lines, a currency swap agreement, and postponed import payments.
Sri Lanka’s cabinet spokesperson, Bandula Gunawardana stated, “discussions with bilateral creditors, including India and China, regarding the restructuring of Sri Lanka’s debt are moving ahead positively, and we are optimistic about securing support from the IMF in the first quarter of 2023.”
Sri Lanka must obtain prior financing assurances from creditors, align its substantial debt load on a sustainable trajectory, and enhance public revenue before the global lender will release the funds, according to the IMF.
The IMF has emphasized the necessity of collaborative discussions involving three of Sri Lanka’s principal bilateral creditors – China, Japan, and India.
Sri Lanka’s cabinet announced that it will reduce its recurrent budget expenditure by six percent in 2023 and has sanctioned a plan to postpone salaries for certain public employees to manage public finances. (Reuters/NAN)
