The International Monetary Fund, IMF approved a staff-level agreement to aid Sri Lanka for as much as US$2.9. This agreement is directly under the Extended Fund Facility agreement after the country’s default on its sovereign debt. The country’s total default comprises US$12.5bn of international bonds plus debt covering US$51bn. In a statement, the firm announced that the agreement would be agreed by the IMF management and executive board. Following the process, there would also be implementation on financial assurances from Sri Lanka’s official creditors. Thus, the collaboration could manifest the good faith of efforts for private agreement creditors.
IMF continues that in order to help ensure debt sustainability and closing financing gap, the country needs creditors and additional financing. Sri Lanka must also meet IMF conditions. The conditions are improving government revenue. This could be in measuring wealth tax, fuel and electricity pricing reform, reducing corruption and building foreign reserves. Masahiro Nozaki, IMF official said in public that the IMF programme relates to other financing from multilateral creditors. He mentioned it as a catalytic effect.
It means that both official and private creditors need to agree on the country’s scheme to restructure sovereign debt for sustainability. Peter Breuer, the official also added that when creditors refuse to provide the assurances, it would worsen Sri Lanka’s condition. In other words, repayment capacity would be low. However, recently the country has also received support from major economies like India, China and Japan. IMF officials continued that Sri Lanka is actually in a position that the debt is away from Paris Club creditors. Sri Lankan president Gotabaya Rajapaksa left the country due to fuel and power shortages protests.