IMF says any loan to Sri Lanka requires debt sustainability

By David Lawder

WASHINGTON (Reuters) -The International Monetary Fund stated conversations with Sri Lanka on a possible IMF personal loan application are at an early phase and any offer would have to have “enough assurances” that the island country’s money owed can be place on a sustainable path.

In a statement emailed to Reuters, IMF Sri Lanka Mission Main Masahiro Nozaki claimed that IMF Controlling Director Kristalina Georgieva talked about lending possibilities and coverage programs with a Sri Lankan delegation on Tuesday.

“An IMF-supported plan should be developed to resolve Sri Lanka’s acute balance of payments complications and put the economy back again on a sustainable development route as early as probable,” Nozaki explained.

The assertion came following protests in reaction to shortages of fuel and other essentials turned fatal on Tuesday and Sri Lanka’s Finance Minister formally questioned the Fund for a Fast Financing Instrument mortgage for countries needing urgent equilibrium-of-payments guidance.

Nozaki explained the IMF is “extremely worried about the current financial disaster in Sri Lanka and hardships endured by the men and women, specially the lousy and susceptible.”

But he noted that IMF workers experienced established very last month in an annual financial evaluate that Sri Lanka’s public debt was unsustainable, and the place desires to just take techniques to restore debt sustainability prior to any IMF lending, like the emergency Rapid Funding Instrument (RFI).

These restoration of financial debt sustainability normally calls for a restructuring or reprofiling of public debts, which in Sri Lanka’s scenario would call for cooperation from China, 1 of its major bilateral lenders.

The IMF utilized the very low-conditionality RFI loans thoroughly to aid nations around the world for the duration of the COVID-19 pandemic and has delivered this kind of loans to simplicity equilibrium of payments problems just after purely natural disasters, conflicts and commodity price tag shocks.

“These criteria would need to have to be examined for a likely RFI for Sri Lanka, once adequate assurances are obtained that personal debt sustainability will be solved,” Nozaki said.

Story proceeds

He extra that the certain structure of a Sri Lanka IMF financial loan, including software targets and conditionality, would be agreed by means of intensive discussions concerning the governing administration and IMF staff members.

“The conversations are nevertheless at an early stage,” Nozaki claimed.

(Reporting by David Lawder Modifying by Tom Hogue and Jacqueline Wong)