Sri Lanka’s new political leadership is preparing to quickly initiate talks with the International Monetary Fund (IMF) to continue its current financial programme, while also accelerating debt relief discussions with foreign creditors to support the country’s fragile economic recovery, according to Finance Ministry sources.
Recognising the need to advance key economic reforms, an IMF team is scheduled to visit Sri Lanka on Tuesday, Oct. 2, to assess the nation’s economic progress.
According to IMF’s Communications Chief Julie Kozack, the Fund’s third review of Sri Lanka’s $2.9 billion Extended Fund Facility is planned for mid-October, with the precise schedule to be aligned with the newly elected government.
In his first televised address, President Anura Kumara Dissanayake underscored his commitment to promptly resume talks with the IMF, emphasising the importance of these talks for the country’s full recovery from one of its most severe economic crises.
The IMF’s upcoming staff visit will assess Sri Lanka’s progress by October, and it will determine the disbursement of the next financial tranche, expected in November.
Meanwhile, Central Bank Governor Nandalal Weerasinghe disclosed that Sri Lanka’s debt restructuring was nearing completion, with a bond exchange anticipated within six to eight weeks if the government followed the current Debt Sustainability Analysis (DSA).
Although the Central Bank was not involved in the DSA decision-making, the Finance Ministry must decide whether to renegotiate or maintain the current DSA framework, he said.
The remaining steps in the restructuring include finalising agreements with international and local bondholders and the Asian Development Bank (ADB). Once the comparability of debt relief measures such as interest reductions and maturity extensions are evaluated, a bond exchange can proceed within the expected timeframe.
If all conditions are met, the bond exchange will take place within six to eight weeks. Dr. Weerasinghe said that completing the debt restructuring was essential for Sri Lanka’s financial stability.
Despite the progress, IMF officials have warned that the country is still in a vulnerable position and that maintaining current gains is crucial for a sustainable recovery.
The hope is that this 17th IMF programme will address the root causes of corruption and poor governance. However, the lack of meaningful progress in these areas suggests the IMF may not be prioritising compliance with governance commitments during the programme’s renewal.
