Debt-Stricken Sri Lanka Reaches Initial Deal for I.M.F. Bailout

Japan, one of the main bilateral lenders, has announced its willingness to convene a conference of the creditors to help restructure the debt, but it is not clear when such a meeting would place or whether China would attend.

The two countries, along with India, make up the main bilateral lenders. As Sri Lanka descended into crisis this year and struggled to get new funding, India extended billions of dollars in loans, credit lines and currency swaps.

For months, Sri Lanka’s economic crisis festered as officials in Mr. Rajapaksa’s government remained in denial of the gravity of the situation. Negotiations with the I.M.F. finally began in April in Washington, followed by virtual negotiations and visits by I.M.F. teams.

The discussions focused on reducing Sri Lanka’s fiscal deficits and “designing a comprehensive economic program to correct the macroeconomic imbalances, restore public debt sustainability,” the I.M.F. said.

W. A. Wijewardena, an economist who formerly served as the deputy governor of Sri Lanka’s Central Bank, said some of the required reforms — such as reducing the retirement age or improving tax collection — would be easier for the government to achieve than others.

Privatizing state-owned enterprises that are a burden on the treasury, or shifting the economy to an export-oriented one that would bring Sri Lanka sufficient foreign reserves, are long-term projects that will require overcoming political pushback from powerful unions.

Article source: https://www.nytimes.com/2022/09/01/world/asia/sri-lanka-imf-bailout.html