Wednesday Nov 13, 2024
Wednesday Nov 13, 2024
Wednesday, 8 February 2023 00:55 - - {{hitsCtrl.values.hits}}
The Paris Club creditors have provided their financing assurance to support the International Monetary Fund’s (IMF) approval of $ 2.9 billion four-year Extended Fund Facility (EFF) for Sri Lanka.
The decision was made by the Paris Club creditors at their meeting on 25 January 2023 and the subsequent statement was released by President Ranil Wickremesinghe’s media office yesterday.
Sri Lanka owes $ 4.17 billion to Paris Club members as of September 2022. It amounts to 38.5% of $ 10.8 billion total outstanding to bilateral creditors with the balance $ 6.6 billion held by Non-Paris Club countries including China and India. Sri Lanka also owes $ 14.7 billion separately to commercial creditors.
In an undated statement the Paris Club said its members held a meeting on 25 January 25, 2023 in the presence of representatives from Hungary, Saudi Arabia, the Kuwait Fund for Arab Economic Development and India, as well as from the IMF and the World Bank, to provide financing assurances to support the approval by the IMF Executive Board of the envisaged IMF program for Sri Lanka, which would allow to restore the country’s macroeconomic stability.
They examined the macroeconomic and financial situation of Sri Lanka, including its long-term debt sustainability, and the need for a debt treatment by all bilateral creditors to both fill the financing gap and to ensure Sri Lanka’s debt sustainability in line with the proposed Extended Fund Facility.
It acknowledged Sri Lanka authorities presenting their economic and financial situation to its creditors, which underscored its need for debt treatment from all creditors. They also presented their reform program that will be supported by an IMF arrangement requiring a debt treatment to restore debt sustainability, as well as the prior actions already implemented.
The statement said the Paris Club members as well as Hungary, Saudi Arabia and India continue to look forward to working together along with all bilateral creditors and to engage with other key stakeholders in order to proceed with a comparable debt restructuring as soon as possible.
Shortly after the conclusion of a staff-level agreement between the Sri Lankan authorities and IMF staff on 1 September 2022, on a 48-month Extended Fund Facility arrangement, the Paris Club publicly stated its readiness to provide the necessary financing assurances in a timely manner and in coordination with other bilateral official creditors.
To this end, the Paris Club has been engaging proactively with Sri Lankan authorities, the IMF, and Sri Lanka’s other official bilateral creditors, including by sharing its technical analysis in order to enhance the bilateral official creditors’ collective understanding of the need for debt treatment.
To support the implementation of the envisaged IMF supported program and the Sri Lankan authorities’ efforts with other official bilateral creditors, Paris Club members, jointly with Hungary, expressed their full commitment to negotiate with Sri Lanka terms of a restructuring of their eligible claims, in accordance with the comparability of treatment principle among all bilateral creditors, and with the goal of restoring debt sustainability with due regard to targets and overall macroeconomic goals under the Extended Fund Facility.
Saudi Arabia expressed its support for the process and acknowledged the importance of offering financing assurances in the near future. Members further expressed appreciation for the specific and credible financing assurances issued by India on 16 January 2023 and its coordination with the Paris Club.
The Paris Club members as well as Hungary and Saudi Arabia urged other official bilateral creditors, including China, to do the same in line with IMF program parameters as soon as possible.
Paris Club members further noted the Sri Lankan authorities’ commitment to seek from all its commercial creditors and other official bilateral creditors a debt treatment on terms at least as favourable, and to hold all creditors in arrears until a comparable debt treatment is provided.
Sri Lanka’s bilateral official creditors which are Paris Club members are Japan, France, Korea, Germany, the United States of America, Spain, the Netherlands, Russia, Sweden, Austria, Canada, the United Kingdom, Denmark, Belgium, and Australia. Non-Paris Club members include China, India, Saudi Arabia, Kuwait, Hungary, Iran, Pakistan, and Bangladesh.
The Paris Club was formed in 1956. It is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by borrower countries. A staff-level agreement was concluded between Sri Lankan authorities and the International Monetary Fund staff for a 48-month arrangement under the Extended Fund Facility (EFF) on 2 September 2022.
