THE second review of Sri Lanka’s $2.9 billion (£2.29bn) bailout with the International Monetary Fund (IMF) could be completed as early as the first half of 2024, provided it managed to meet the debt restructuring and revenue targets set under the programmed, an official said last Wednesday (13).
The IMF said its executive board cleared the first review of Sri Lanka’s bailout last Tuesday (12), providing about $337 million (£265m) in funds to help tackle the fallout from the country’s worst financial crisis in decades. The total amount sent so far to Sri Lanka now stands at about $670m (£528m), according to the IMF.
An IMF delegation will travel to Sri Lanka in March and the second review could be finalised about two months afterwards, Peter Breuer, senior mission chief for Sri Lanka, said at a briefing in Washington.
Sri Lanka will need to reach agreements with its official creditors which include China, Japan and India, as well as a resolution with external private creditors to restructure its foreign debt before finalising the review.
“We are projecting that next year there will be positive growth. So, I think there are signs that all these reforms are paying off, but clearly the economy is not yet out of the woods, a lot more reforms need to happen (and) sustaining this reform momentum is really key for the economy to emerge from the crisis,” Breuer said.
Sri Lanka’s economy, which began to stabilise after the bailout was secured in March, will contract by 3.6 per cent this year. The country is likely to grow by 1.8 per cent in 2024 as economic expansion gains pace, he added.
Sri Lanka needs to raise its tax revenue, reform loss-making state enterprises and build stronger reserves to stay on the IMF programme path.
China would not need to join the Official Creditor Committee (OCC), co-chaired by Japan and India, as the core part of the debt restructuring had been completed.
China is Sri Lanka’s largest bilateral creditor, and reached an agreement in principle to rework about $4.2bn (£3.3bn) of debt in October.