Crisis-hit Sri Lanka strikes staff-level loan pact with IMF – Sources

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COLOMBO (Reuters) – Sri Lanka and the International Monetary Fund (IMF) have reached a preliminary agreement on an emergency loan to the crisis-hit country and an official announcement will be made on Thursday, four sources with direct knowledge of the matter said. the case.

The indebted island nation had requested up to $3 billion from the global lender as it battled its worst economic crisis in more than seven decades. Sri Lankans have faced severe commodity shortages and exorbitant prices for months.

The sources, who declined to be named ahead of an official announcement, did not say how much money Sri Lanka might get.

The IMF said a team of visitors who arrived a week ago had extended their stay for a day and would give a press conference at the central bank on Thursday morning.

Political cartoons about world leaders

“The IMF mission in Colombo has been extended for one day as discussions are still ongoing with the authorities,” he said in a statement.

Sri Lankan government spokespersons did not respond to requests for comment.

Presenting an interim budget for the rest of the year, Sri Lankan President Ranil Wickremesinghe told parliament on Tuesday that talks with the IMF had reached the “final stage”.

Staff-level agreements are usually subject to approval by IMF management and its board, after which recipient countries have access to the funds.

The IMF team met with Sri Lankan government officials, including the Treasury Secretary, late Tuesday night to address concerns on the political front, the sources said. Most of the technical details had been agreed in advance.

Sri Lankan shares jumped 2.6% on news of the preliminary loan pact, their best session since Aug. 12. August was the best month for equities since January of last year.

Sri Lankan sovereign bond prices rose 3.7 cents to the dollar. The country’s notes maturing in 2026 and 2028, which are trading at distressed levels, lead the latest gains.

SEEK TO RESTRUCTURE DEBT

The country of 22 million people was plunged into political crisis last month when then-president Gotabaya Rajapaksa fled after a popular uprising over economic hardship.

Rajapaksa was replaced by six-time Prime Minister Wickremesinghe, who also heads the finance department and held several rounds of talks with the IMF team.

The country is also trying to restructure its debt of about $29 billion, with Japan expected to hold talks with other major creditors such as China. Sri Lanka also plans to contact private creditors who hold the majority of its $19 billion in sovereign bonds soon to begin restructuring talks.

According to ratings agency S&P Global, Sri Lanka missed interest payments on bonds due June 3, June 28 and July 18, and a principal payment due July 25.

The COVID-19 pandemic has disrupted Sri Lanka’s tourism-dependent economy and reduced remittances from overseas workers.

The damage has been compounded by rising oil prices, populist tax cuts and a seven-month ban last year on chemical fertilizer imports that have devastated agriculture.

(Reporting by Uditha Jayasinghe; Additional reporting by Chris Thomas in Bengaluru and Jorgelina do Rosario in London; Writing by Krishna N. Das; Editing by Raju Gopalakrishnan and Himani Sarkar)

Copyright 2022 Thomson Reuters.

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