China has agreed to restructure its loans to the bankrupt island nation of Sri Lanka, clearing the final obstacle to a long-awaited International Monetary Fund bailout.
President Ranil Wickremesinghe told parliament on Tuesday that he expected the first tranche from the Washington-based lender’s promised $2.9 billion in funds to be released within the month.
“We have done our part, I hope the IMF will do theirs,” he said in a special address to lawmakers, emphasising that with support from China, all funding requirements had been met.
Wickremesinghe said the state-owned Exim Bank of China had sent a letter to the IMF on Monday night signalling its willingness to go ahead with restructuring.
There was no immediate confirmation of the announcement from the bank or the IMF.
Sri Lanka needs to repay about $6 billion on average each year until 2029 and will have to keep engaging with the IMF, Wickremesinghe told parliament.
Repairing ruined finances
An unprecedented economic crisis has seen Sri Lanka’s 22 million people suffer acute food, fuel and medicine shortages, along with extended blackouts and runaway inflation.
The crisis culminated last July when tens of thousands of protesters stormed then-president Gotabaya Rajapaksa’s official residence, forcing him to flee abroad and resign.
Sri Lanka defaulted on its $46 billion foreign debt last April. Just over $14 billion of that is bilateral debt owed to foreign governments, of which China holds 52 percent.
Wickremesinghe’s government has been working to repair the country’s ruined finances and secure the sorely needed IMF rescue package. But it was held up by debt negotiations with China, its largest bilateral creditor.
They entered into a staff-level agreement with the IMF for a $2.9 billion rescue package in September, but the release of it was held up pending “financial assurances” from creditors.
Japan and India, its other biggest creditors, along with a host of others known as the “Paris Club” creditor nations, had given assurances earlier this year, leaving only China to give its assent.
Wickremesinghe warned last month Sri Lanka would remain bankrupt for at least three more years, and acknowledged that his austerity measures had caused discontent.