The Sri Lankan government will virtually brief all its external creditors on September 23, 2022, on the deal agreed with the International Monetary Fund (IMF) for the economic recovery and the next steps in the debt restructuring process.

On September 1, the IMF reached a staff-level agreement to support Sri Lanka's economic policies with a 48-month arrangement under the Extended Fund Facility (EFF) of about $2.9 billion.

Economic crisis since independence

Sri Lanka is going through its worst economic crisis since its independence in 1948 which was triggered by a severe paucity of foreign exchange reserves.

"Sri Lanka will make an online presentation to external creditors on September 23 updating them on a deal agreed with the International Monetary Fund and recent economic developments," Clifford Chance, the debt restructuring adviser, said in a statement on Saturday.

The Sri Lankan Finance Ministry will update creditors on recent macro-economic developments, the objectives of the IMF package, and the next steps in the debt restructuring process.

The IMF while announcing its willingness to enter a staff-level agreement at the end of August said that agreement with creditors was the key to the facility.

Declared international debt default

In mid-April, Sri Lanka declared its international debt default due to the forex crisis. The country owes $51 billion in foreign debt, of which $28 billion must be paid by 2027.

The worsening forex situation affected the ability to fund importing fuel and essentials, triggering massive waves of public protests in the country. An uprising in mid-July forced the resignation of then President Gotabaya Rajapaksa.

Sri Lanka has to get assurances from creditors about their willingness to restructure debt for the International Monetary Fund to unlock credit from the agency and others.

The objectives of Sri Lanka’s new EFF-supported programme are to restore macroeconomic stability and debt sustainability while safeguarding financial stability, protecting the vulnerable, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential, according to the IMF.

The IMF also said that debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps.

Financing assurances to restore debt sustainability from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors are crucial before the IMF can provide financial support to Sri Lanka.

Sri Lanka is also expected to restructure its debt worth $29 billion, with Japan expected to coordinate with other creditor nations, including China on this issue.

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