COLOMBO: Crisis-hit Sri Lanka has reached a preliminary agreement with the International Monetary Fund (IMF) for a loan of about US$2.9 billion, the international lender said in a statement on Thursday (Sep 1).
"The objectives of Sri Lanka's new Fund-supported programme are to restore macroeconomic stability and debt sustainability," the statement said, outlining the 48-month long arrangement under the IMF's Extended Fund Facility.
The agreement is subject to approval by IMF management and its executive board and is contingent on Sri Lankan authorities following through with previously agreed measures.
The IMF also requires receiving financing assurances from Sri Lanka's official creditors, besides ensuring efforts are made to reach a collaborative agreement with private creditors.
"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," the statement added.
The IMF's head of mission Peter Breuer said creditors also needed to help Sri Lanka extricate itself from a "deep crisis" and return to servicing its debt.
"It really is in the interest of all creditors to work with Sri Lanka on this front," Breuer told reporters.
"If creditors are not willing to provide these assurances, that would indeed deepen the crisis in Sri Lanka and would undermine its repayment capacity."
Sri Lanka needs to restructure nearly US$30 billion of debt, and Japan has offered to lead talks with the other main creditors, including India and China.
It will also need to strike a deal with international banks and asset managers that hold the majority of its US$19 billion worth of sovereign bonds, which are now classified as in default.
The debt-laden country has been seeking up to US$3 billion from the IMF in a bid to escape its worst economic crisis since independence from Britain in 1948.
Sri Lankans have faced acute shortages of fuel and other basic goods for months, leaving it in political turmoil and hit by runaway inflation, which is now at almost 65 per cent year-on-year.