A strong international support base for Sri Lanka to get assurances from its creditors

Debt restructuring

By Sanath Nanayakkare

The latest announcements made by the Paris Club, Chinese Foreign Ministry Spokesperson Zhao Lijian, the Indian High Commissioner to Sri Lanka Gopal Baglay, Japanese Finance Minister Shunichi Suzuki, the Delegation of the European Union to Sri Lanka and British Prime Minister Boris Johnson show quite good congruence with the IMF staff-level agreement with Sri Lanka on a USD 2.9 billion programme confirmed on September 1.

These announcements appear to be consolidating a strong international support base for Sri Lanka to come out of its economic crisis and achieve macroeconomic stability as the IMF has assessed Sri Lanka’s debt burden as unsustainable, and therefore, significant relief would have to come from the creditors’ side.

The Paris Club has reiterated its willingness to coordinate with non-Paris Club official bilateral creditors to provide the necessary financing assurances in a timely manner which is a key concern for the IMF to go ahead with its extended fund facility programme (EFF).Paris Club said it is ready to start the debt treatment process and reiterated its willingness to coordinate with non-Paris Club official bilateral creditors to provide the necessary financing assurances in a timely manner and ensure fair burden sharing, as already proposed to the largest other official bilateral creditors.

They assured that, “The Paris Club remains at the disposal of the Sri Lankan authorities and non-Paris Club official bilateral creditors to further discuss the next steps of the debt treatment process.”

Meanwhile, International Monetary Fund Chief Kristalina Georgieva said yesterday said that she was very pleased that IMF staff and Sri Lankan government officials have reached a staff-level agreement to support the country’s economic policies with a 48-month Extended Fund Facility of about US$2.9 billion, adding that it is an important step forward for Sri Lanka.

The delegation of the European Union to Sri Lanka also welcomed the staff-level agreement between the International Monetary Fund (IMF) and Sri Lanka.Taking to its official Twitter handle, the EU delegation said it looks forward to continuing cooperation on public finance management and green economy, including export industries.Making a timely gesture, Japan called on all creditor nations to discuss Sri Lanka’s debt restructuring. “It’s important for all creditor nations, including China and India, to gather to discuss Sri Lanka’s debt restructuring,” Japanese Finance Minister Shunichi Suzuki said.

Suzuki made the comments a day after Sri Lanka struck a staff-level agreement with the IMF.And very importantly at this juncture, China, a major creditor nation of Sri Lanka, has said it stands ready to work with relevant countries and international financial institutions to continue to play a positive role in supporting Sri Lanka’s response to current difficulties and efforts to ease debt burden and realize sustainable development.

Chinese Foreign Ministry Spokesperson Zhao Lijian said last week that China has paid close attention to the difficulties and challenges faced by Sri Lanka and had provided help to Sri Lanka’s socio-economic development to the best of its capacity.Meanwhile, the Indian High Commissioner who met with President Ranil Wickremesinghe last week said that during the discussions they had, they reviewed all-around bilateral cooperation and agreed to further strengthen close India – Sri Lanka ties in all spheres.

Meanwhile, British Prime Minister Boris Johnson said,” We- and others in the international community – want to work with Sri Lanka to make real and tangible progress on these issues.”

He also highlighted the recently announced Developing Countries Trading Scheme. This, he said, will offer Sri Lanka the opportunity to benefit from duty-free access for the vast majority of total goods exported to the UK.

“As we continue to strengthen our bilateral relationship, I hope we can find more opportunities to enhance trade and investment. I anticipate that there are strong opportunities for UK support with green finance and renewable energy,” the British PM said, recalling the conversation the two leaders had in May about shared ambitions on climate change.

British Prime Minister Boris Johnson concluded his message by expressing confidence that with Sri Lanka due to celebrate its 75th Anniversary of Independence, the UK and Sri Lanka would continue to build an even deeper and stronger partnership. The IMF on September 1 announced that it reached a staff-level agreement with Sri Lanka, for a $2.9 billion loan package, but made contingent on assurances from Sri Lanka’s creditors.