Financing assurances to restore debt sustainability from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors are crucial before the IMF can provide financial support to Sri Lanka, after reaching a staff-level agreement, the IMF team said.
The objectives of Sri Lanka’s new Fund-supported program are to restore macroeconomic stability and debt sustainability, while safeguarding financial stability, protecting the vulnerable, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.
The agreement is subject to the approval by IMF management and the Executive Board in the period ahead, contingent on the implementation by the authorities of prior actions, and on receiving financing assurances from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors.
"So, we do need to await now for these conditions to take place. The authorities work on these so-called prior actions i.e. reforms that they will undertake even before the program is put to the IMF board, those can go on at the same time as the engagement with the creditors on obtaining financing assurances. So, that can run in parallel and we would very much encourage it; so that there are no delays if one of them is completed and the other one is not. So, we would very much encourage rapid progress on both fronts with respect to these prior actions as well as moving forward with the process of engaging the creditors," Peter Breuer, Senior Mission Chief for Sri Lanka told reporters in Colombo.
Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps.
"The authorities have hired financial and legal advisors who assist the authorities in this process.
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It's already underway but we need to expedite it in light of this staff-level agreement that has been reached that should give assurance to creditors that Sri Lanka will be engaging in a comprehensive set of economic reforms."
IMF staff and the Sri Lankan authorities reached a staff-level agreement to support Sri Lanka’s economic policies with a 48-month arrangement under the Extended Fund Facility (EFF) of about US$2.9 billion.
Related: IMF Staff Reaches Staff-Level Agreement on an EFF Arrangement with Sri Lanka: IMF