IMF says it needs assurances from Sri Lanka’s creditors

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The country’s debt burden is considered ‘unsustainable’ leading the lender to seek assurances from creditors.

The International Monetary Fund (IMF) has said it will need “adequate assurances” from Sri Lanka’s creditors for a new program as it prepares a visit to Colombo later this month.

The goal of the visit is to make progress on a staff-level agreement for an aid package “in the near term,” to help the island nation weather a severe economic crisis, the IMF said on Friday.

Staff from the global lender will be in Colombo from August 24 to 31, the IMF said.

“Because Sri Lanka’s public debt is assessed as unsustainable, approval by the IMF Executive Board of the Extended Fund Facility program would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored,” the IMF said.

The loan package being negotiated with the IMF is for between $2bn and $3bn according to President Ranil Wickremesinghe, who said he would present an interim budget in September focusing on fiscal consolidation measures agreed with the IMF.

The country of 22 million people is facing its most severe financial crisis since independence from Britain in 1948, resulting from the combined effect of the COVID-19 pandemic and economic mismanagement.

Sri Lankans have been battling shortages for months amid crippling inflation and a devalued currency, stoking unprecedented mass protests. Thousands of people stormed the colonial-era presidential residence in Colombo, the commercial capital, in early July.

Agencies

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