The discussions symbolize India’s support for the early conclusion and approval of the appropriate IMF Program for Sri Lanka, which requires financial guarantees from creditors to make Sri Lanka’s debt serviceable. sustainability, the High Commission of India said in a statement.
Sri Lanka and International Monetary Fund reached a preliminary agreement in early September for a loan of approximately U.S. dollar 2.9 billion, depending on the country receiving financial guarantees from official creditors and negotiations with private creditors.
“In response to the recent request of the Government of Sri Lanka, the High Commissioner of India to Colombo held the first round of discussions on 16 September 2022 in Colombo with the Government of Sri Lanka on the formal debt restructuring. Sri Lanka’s bilateral relationship with India,” the statement said.
“India will continue to work closely with the relevant stakeholders of Sri Lanka,” it said.
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India’s debt restructuring talks come ahead of a virtual meeting called by the Sri Lankan government to update all its external creditors on the deal agreed with the IMF for economic recovery. The event will be held on September 23.
Debt restructuring advisor Clifford Chance said Sri Lanka will present external creditors online, updating them on recent macroeconomic developments, the objectives of the IMF package and next steps. of the debt restructuring process.
The IMF, while announcing its willingness to enter into a staff-level agreement by the end of August, said that the agreement with creditors was key to the facility.
Sri Lanka first declared a sovereign default in mid-April before contacting the IMF for a possible bailout.
By the end of 2021, India’s loans amount to 2% of Sri Lanka’s total external debt. The Asian Development Bank with 13%, China and Japan with 10% are the main creditors of this island nation.
India has since the beginning of 2022 provided $4 billion worth of assistance as Sri Lanka plunged into its worst economic crisis since 1948.
The country of 22 million people has been battling shortages of essentials, including fuel, food and medicine, for months after its foreign exchange reserves fell to record lows. stalled imports and caused unprecedented unrest.
Anti-government protests forced the President Gotabaya Rajapaksa to flee the country in July. He returned to Colombo earlier this month after a new government was formed under the President Ranil Wickremesinghe and anti-government protests subsided.