The International Monetary Fund says discussions with Sri Lanka on a potential loan program are at an early stage and any deal would require “adequate assurances” that the country’s debts can be put on a sustainable path.
In a statement to Reuters, IMF Sri Lanka Mission Chief Masahiro Nozaki said that IMF Managing Director Kristalina Georgieva discussed lending options and policy plans with a Sri Lankan delegation yesterday.
Nozaki said an IMF-supported program should be designed to resolve Sri Lanka’s acute balance of payments problems and put the economy back on a sustainable growth path as early as possible.
The statement came after Finance Minister Ali Sabry formally asked the Fund for a Rapid Financing Instrument loan for countries needing urgent balance-of-payments support.
Nozaki said the IMF is “very concerned about the current economic crisis in Sri Lanka and hardships suffered by the people, especially the poor and vulnerable.”
But he noted that IMF staff had determined last month in an annual economic review that Sri Lanka’s public debt was unsustainable, and the country needs to take steps to restore debt sustainability prior to any IMF lending, including the emergency Rapid Financing Instrument (RFI).
He said, such restoration of debt sustainability typically requires restructuring or reprofiling of public debts, which in Sri Lanka’s case would require cooperation from China, one of its largest bilateral creditors.
Nozaki said. He added that the specific design of a Sri Lanka IMF loan, including program targets and conditionality, would be agreed upon through extensive discussions between the government and IMF staff.