The approval of the second tranche under the Extended Fund Facility by the Board of the International Monetary Fund (IMF) is likely on 14 December and not 6 December as previously envisaged.

Sources said the deferment follows Sri Lanka and the Paris Club reaching an agreement on the restructuring of $ 5.9 billion outstanding debt only on Wednesday,

Previously the Government envisaged that the IMF Executive Board would consider the Staff Report on Sri Lanka at a meeting on 6 December. 

But given the delay in finalising the majority of EDR, the case of Sri Lanka was postponed.

Sources said that the Finance Ministry has already conveyed to the Government that  the IMF approval was anticipated. Based on the preliminary  forecast, President and Finance Minister Ranil Wickremesinghe was to announce the IMF breakthrough during the votes of the Finance Ministry in the on-going debate on 2024 Budget.

With the requirement of two weeks’ notice of new development, it is leant that the IMF Executive Board would only consider Sri Lanka’s case on 14 December, the day after the third reading of the 2024 Budget.

On Wednesday the Finance Ministry announced that Sri Lanka’s External Debt Restructuring (EDR) achieved a “landmark step” with an agreement reached in principle with the Official Creditor Committee on treatment of debt worth $ 5.9 billion.

The agreement in principle consists of a mix of long-term maturity extension and reduction in interest rates, the Finance Ministry said.

“This agreement marks a landmark step for Sri Lanka. We extend our sincerest thanks to the OCC and its co-chairs, Japan, India and France, for their unwavering support in resolving our country’s public debt situation. This agreement serves as a key milestone in Sri Lanka’s ongoing endeavour to achieve public debt sustainability and to foster economic recovery,” Secretary to the Treasury K.M. Mahinda Siriwardana said in a statement.

This agreement in principle, together with the agreement in principle reached last month with China Eximbank, goes a long way in dealing with Sri Lanka’s external bilateral debt restructuring. The next steps will include finalising similar agreements with Sri Lanka’s remaining official bilateral creditors, including Saudi Arabia, Pakistan, Kuwait and Iran, altogether representing a further $ 274 million of outstanding claims.

The Finance Ministry said Sri Lanka now intends to focus its efforts on reaching comparable debt restructuring agreements with external commercial creditors, and in particular with its holders of international sovereign bonds.

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