Lanka to use IMF tranche to settle outstanding credit

Colombo, October 21

Sri Lanka would utilise the IMF’s second tranche of the bailout deal to settle arrears owed to multilateral creditors while expediting the debt restructuring process, Minister of Finance Shehan Semasinghe has said. Sri Lanka is now in a position to receive the second tranche of USD 330 million upon approval of the Staff-Level Agreement by the IMF Executive Board. The Staff-Level Agreement will enable the World Bank, Asian Development Bank and other multilateral financial institutions to make the remaining payments, further expediting debt restructuring efforts with international partners, Semasinghe stated on Friday.

The IMF had in March this year approved a 48-month, USD 2.9 billion extended arrangement under the Extended Fund Facility (EFF) to support Sri Lanka’s economic policies and reforms.

It said, despite showing early signs of stabilisation, the full economic recovery was not yet assured. Sri Lanka’s external position had weakened as a result of the prolonged debt restructuring discussions and reserve accumulation has slowed in recent months. Lanka needed to increase revenues and signal better governance. The IMF said it wanted to be sure that debt sustainability is being restored in Sri Lanka.