Sri Lanka starts crucial debt restructuring talks with creditors

COLOMBO: Sri Lanka on Thursday held a second round of crucial talks with its bilateral creditors, state minister of finance Shehan Semasinghe said as the crisis-hit island nation attempts to get assurances of debt restructuring from them to close a deal with the IMF.

Sri Lanka held talks with the International Monetary Fund on October 16 on the release of a USD 2.9 billion rescue package by the Fund, the completion of which hinged on assurances from the country's creditors on debt restructuring.

"The first round was in Washington. We scheduled another meeting to ensure that all matters will be clarified," Semasinghe told a meeting of Inland Revenue officers here.

All bilateral creditors would be participating to review the progress of the debt restructuring talks, in addition to the Central Bank of Sri Lanka, the IMF, and financial and legal advisers, the minister said.

"Financial assurances from our bilateral creditors would be important for us to obtain the approval of the IMF board of directors,'' he said.

Details of the talks were not available.

Sri Lanka reached a staff-level agreement with the IMF in late August for a USD 2.9 billion rescue package over 4 years. Its completion depends on assurances from Sri Lanka's creditors on debt restructuring.

Sri Lanka has large debt rollover volumes (Gross Financing Need) running up to 37 per cent of GDP in 2022, which the IMF wants to bring down, according to the EconomyNext news portal.

The exact GFN target is not known, but other countries under restructure have levels around 15 per cent, and some less, it said.

President Ranil Wickremesinghe who steers the talks with the IMF said this week he was hopeful of the realisation of the facility by January.

The Sri Lankan government in May appointed international legal and debt advisors for debt restructuring after the country declared its international debt default for the first time in history.

Sri Lanka is nearly bankrupt and has suspended repaying its USD 51 billion foreign debt, of which it must repay USD 28 billion by 2027.

Sri Lanka, a country of 22 million people, plunged into financial and political turmoil earlier this year as it faced a shortage of foreign currencies. Due to this, the country has been unable to afford key imports, including fuel, fertiliser and medicine, leading to serpentine queues.