IMF to meet Sri Lankan president to finalize rescue plan | Business and Economics News

The IMF’s second such visit comes on Wednesday as Sri Lanka scrambles to lock in $3 billion to pull itself out of the crisis.

A team from the International Monetary Fund (IMF) will meet Sri Lanka’s president for talks to finalize a bailout package, including debt restructuring of around $29 billion, amid the country’s worst financial crisis for over 70 years.

The IMF’s second visit in three months takes place on Wednesday as the Indian Ocean island seeks to strike a staff-level pact with the global lender for a possible $3bn program to exit the crisis .

“The IMF team will meet with the president and a delegation from the finance ministry later today,” an official from the presidential secretariat told Reuters, declining to be identified because he was not authorized to speak to the media.

The team will also meet with the central bank governor and other officials, including representatives of Sri Lanka’s financial and legal advisers, Lazard’s and Clifford Chance.

The main sticking point of the talks is how to find a sustainable way for Sri Lanka’s heavy debt, which stood at 114% of gross domestic product (GDP) at the end of last year, to conclude a personnel agreement in September.

Sri Lanka has $9.6 billion in bilateral debt and its private credit, which includes international sovereign bonds, stands at $19.8 billion, according to finance ministry data.

Japan and China are the main holders of bilateral debt, the latter amounting to about $3.5 billion. Overall, if commercial debt is added, China holds about one-fifth of Sri Lanka’s debt portfolio.

“The question will be how Chinese debt and domestic debt will be included in the talks,” said Timothy Ash, senior sovereign emerging markets strategist at BlueBay Asset Management.

“Other bilateral creditors will not be willing to allow China to not receive comparable treatment this time around. China is part of the problem and must be part of the solution this time around. »

For months, the population of 22 million has battled runaway inflation, economic contraction and severe shortages of essential items of food, fuel and medicine caused by a record drop in foreign exchange reserves.

The country’s worst financial crisis since independence from Britain in 1948 stems from the combined effects of the COVID-19 pandemic and economic mismanagement, sparking unprecedented protests.

In July, then-president Gotabaya Rajapaksa fled the country and resigned after a mass uprising sparked by what many Sri Lankans saw as his mishandling of the financial crisis.

President Ranil Wickremesinghe, who is also finance minister, plans to ask Japan to lead bilateral debt restructuring talks after Sri Lanka secures IMF support.

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