By:Staff WriterColombo (LNW): Director of the Asia and Pacific Department of the International Monetary Fund (IMF), Krishna Srinivasan has stated that the debt relief Sri Lanka currently awaits is expected to contribute USD 17 billion to close the Balance of Payments (BOP) financing gap from 2023 – 2027.
Speaking at the World Bank Group and IMF Spring Meetings, Srinivasan stated the IMF aims to restore debt sustainability and the BOP pressures even after the programme ends.
Thus, he explained that while the debt relief programme will cover nearly USD 17 billion of Sri Lanka’s USD 24 billion financing gap, the rest of the funds are expected to be covered by International Financial Institutions (IFIs).
He noted, however, that the process according to which the restructuring will happen, or how the required relief will be provided, must be negotiated between Sri Lanka and its creditors, stating that the IMF ‘does not get involved’ in this process.
He explained that Sri Lanka will be required to negotiate the matter with its creditors, and the form in which the debt relief will be provided, including principle haircuts, extension of maturity and interest reductions.
Sri Lanka is expected to outline a blueprint later this month, which will provide a basis for engaging with their creditors pertaining to the debt restructuring process.
Global creditors, debtor nations and international financial institutions on Wednesday agreed ways to jumpstart and streamline long-stalled debt restructuring efforts, including through improved data sharing and clearer timetables, reuter news agency reported
The World Bank, International Monetary Fund and India, current president of the Group of 20 (G20) major economies, issued a joint statement after the first full-fledged meeting of the new Global Sovereign Debt Roundtable, held during the spring meetings of the IMF and World Bank in Washington.
The statement, however, did not include mentions of any commitments by China, the world’s largest bilateral creditor, to speed the restructuring process.
Reuters reported Beijing was poised to drop its demand that multilateral development banks share in debt restructuring losses, partly in exchange for the IMF and World Bank providing earlier access to their debt sustainability analyses for countries receiving debt treatments.
But the statement only included the institutions’ part of that bargain, to share more information more quickly and for multilateral development banks (MDBs) to quantify “net positive flows” of concessional financing in restructuring cases.
IMF strategy chief Ceyla Pazarbasioglu said China and other participants had acknowledged that there are different ways of contributing to a restructuring, and “the best way for MDBs to contribute … is to provide fresh financing to countries, as much as possible in grant terms.”