IMF resumes Sri Lanka bailout after China's debt deal

FE Team | Published: December 14, 2023 00:35:49

WASHINGTON, Dec 13 (AFP): The International Monetary Fund (IMF) revived its $2.9 billion bailout for Sri Lanka on Tuesday after the South Asian nation clinched a debt restructuring deal with China, its biggest official lender.
The IMF said its board had completed the first review of Sri Lanka's rescue package known as the Extended Fund facility (EFF) and released the second tranche of $337 million to support economic policies and reforms.
Sri Lanka had expected the progress review to be completed by September, but it was held up pending financial assurances from China, which holds 52 per cent of the island's bilateral debt.
IMF's mission chief for Sri Lanka, Peter Breuer, told reporters in Washington that Colombo had shared China's debt-restructuring offer with the IMF on a "strictly confidential basis."
However, it fell within the IMF's debt sustainability targets for the island, he added.
He said policy reforms were starting to bear fruit and the economy was showing signs of stabilisation, but the key to a full and swift recovery was sustaining reform momentum.
"We encourage the authorities to continue to build on these hard-won gains and further advance revenue mobilisation," Breuer said.
Colombo welcomed the latest IMF cash injection and reiterated its commitment to maintain unpopular reforms to raise taxes, scrap energy subsidies and privatize state enterprises.
"We are grateful to the cooperation of the official creditor committee... for agreeing in principle to the debt restructuring process," junior finance minister Shehan Semasinghe said.