Sri Lankan leader says IMF deal imminent after China’s pledge

COLOMBO – Sri Lanka’s president said on Tuesday that China had made crucial commitments on the debt restructuring, meaning the bankrupt Indian Ocean nation could soon have its $2.9 billion bailout approved.

President Ranil Wickremesinghe told parliament that a letter from China’s EXIM bank containing the necessary assurances was received on Monday evening and that he and the central bank governor had immediately sent a letter of intent to the International Monetary Fund for final approval.

“Now we’ve done our part and I expect the IMF will do its part by the end of this month, week three or four,” Wickremesinghe said.

China owns about 10% of Sri Lanka’s external debt, which exceeds $51 billion. His belated pledges were seen as the final hurdle in securing the bailout after early pledges from India and other creditors.

Wickremesinghe said he expects financial support to come from the World Bank and the Asian Development Bank soon after the IMF deal is finalized.

However, he said difficult economic reforms must be implemented as agreed with the IMF and Sri Lanka cannot afford to dodge them like it has done under 16 previous deals.

“We must emphasize one fact: we are not currently repaying foreign debt, we are only repaying loans to the multilateral financial institutions. If we break the deal with the IMF, we will be forced to repay loans to foreign countries and private banks,” Wickremesinghe said.

“We need to pay back about $6-7 billion every year through 2029. We don’t have foreign currencies for that, so it’s imperative that the IMF continues to talk to our creditors about the debt sustainability arrangements that have been made.”

Wickremesinghe did not disclose what was agreed with the IMF but said he would submit details to Parliament for approval. He also warned that he would crush any street protests trying to derail reform efforts.

Professionals and workers in many other sectors have been protesting for months at large increases in electricity tariffs and income taxes to boost government revenues, a requirement of the IMF package. Opposition parties called for elections for village and town councils, which were postponed by the authorities due to a lack of funds.

Sri Lanka’s worst economic crisis last year caused severe shortages of food, medicines, fuel, cooking gas and electricity, sparking angry street protests that forced then-President Gotabaya Rajapaksa to flee the country and resign.

The economy has shown signs of improvement since Wickremesinghe took office as President last July, with shortages reduced, power outages ended and the Sri Lankan rupee beginning to gain strength.