IMF bailout unlikely by this December

Sri Lanka will likely miss the December 2022 deadline to secure an International Monetary Fund (IMF) loan, and will have to wait for March 2023, the Hindustan Times reported, quoting an unnamed financial analyst based in Washington DC, USA, where the IMF is headquartered. 

It further reported that Sri Lanka will miss the December deadline for securing an IMF loan, as the main bilateral debtor, China, was involved in the 20th Chinese Communist Party (CCP) National Congress, and had little time for holding debt restructuring talks with Colombo. The next meeting of the IMF Executive Board is in March 2023.

Meanwhile, President Ranil Wickremesinghe, addressing the 32nd Annual General Meeting of the Sri Lanka Tea Factory Owners’ Association on 30 October, said: “Now, this is the process. We had to move to reach an agreement by December, which means coming to an agreement by mid-November, and going to the IMF Board in mid-December. In this scenario, we are at an advantage. However, I don’t know whether we can achieve this, for the simple reason that in China, focus on the issue has started only now, after the Chinese Communist Party conference. 

“However, we must aim to secure the IMF agreement by January. The first issue is to ensure that we can restructure bankruptcy. We have to start talks with our creditors. I first went to the Paris Club, where all the creditors were from the West and Japan. However, we are in a unique position today where, out of our three main creditors, only one belongs to the Paris Club, which is Japan. The other two are not in the Paris Club – they are India and China. 

“China only started dealing with bankruptcy in Zambia; I think that India has done so for the first time with Sri Lanka. I have already started discussions with Japan, and now, with India and China. We can come to a common platform of how we can resolve these issues, while we also have discussions on bilateral issues that affect each other’s countries.”

Further, the Hindustan Times reported that while debtors India and Japan have already initiated a dialogue with Colombo on debt reconciliation and restructuring, China is yet to engage in the dialogue, as Beijing was involved in the 20th CCP National Congress and had little time for Sri Lanka. 

It also reported that Sri Lanka’s total debt was $ 36 billion at the end of 2021. Of this, Sri Lanka owes $ 7.1 billion to China, which is 20% percent of its debt. The total public debt, which was 115.3% of the gross domestic product (GDP) at the end of December 2021, has now gone up to 143.7% of GDP by end-June 2022. Of this, the bilateral debt has climbed from 12.7% of GDP to 20.4% of GDP. 

Sri Lanka is to secure a $ 2.9 billion loan from the IMF in eight equal tranches.