- Bonds rise on prospect of IMF deal signing, Rs.
- The details of China Exim’s new financial assurances are unclear.
- Sri Lanka says it has completed all the preliminary steps requested by the IMF.
Colombo: Final approval is expected from Sri Lanka. International Monetary Fund (IMF) $2.9 billion in debt in the third or fourth week of this month, the president said Tuesday, adding that the new Support from China This means that all funding requirements have been met.
The country of 22 million people is struggling with its worst economic crisis since independence from Britain in 1948.
President Ranil Wickremesinghe told Parliament that there are signs. The economy Improvements were being made but there was still insufficient foreign exchange for all imports, which The IMF agreement is important. So that other lenders can also start disbursing funds.
“Sri Lanka has completed all the preliminary steps required by the IMF,” Wickramasinghe said.
He said the Export-Import Bank of China had sent “a new letter” on Monday, and that he and the central bank governor had sent a letter of intent to the IMF.
“As a result of this step and financial assurances from India and the Paris Club, we expect approval for the program in the third or fourth week of March,” he said.
The country’s international debt and currencies rose on the news, with bonds gaining about 3 cents to the dollar while the rupee jumped nearly 8 percent to a 10-month high.
It was not clear what new support China, the world’s biggest sovereign creditor, extended. Sri Lanka on Monday. In January, the Export-Import Bank of China offered Sri Lanka a two-year debt freeze and said it would support its efforts to secure an IMF loan, which Sri Lanka A Lankan source said there was not enough to meet IMF conditions at the time. .
China and India are Sri Lanka’s largest creditors. As of the end of 2020, Sri Lanka owed the Export-Import Bank of China $2.83 billion, or 3.5 percent of the island’s external debt, according to IMF data.
Too much positivity
Calculations by the China Africa Research Initiative show that by the end of 2022, Sri Lanka owed Chinese creditors $7.4 billion, or about a fifth of public external debt.
The Sri Lankan rupee hit an intermediate rate of 325 on Tuesday, up 12 percent, analysts said, against the central bank’s fixed spot rate of 337.67. Analysts said the appreciation was driven by better dollar inflows from tourism and remittances, positive sentiment on the early approval of the IMF deal and lower imports.
“There is a lot of positivity around a possible IMF announcement and more dollar loans are expected with the approval of the bailout,” said Udishan Jonas, chief strategist at equity research firm CAL Research.
“Also, speculators who were hoarding dollars are getting nervous and turning as the rupee appreciates.”
Wickramasinghe said Sri Lanka needs to pay an average of $6 billion per year until 2029 and will have to stay engaged with the IMF.
Debt-troubled countries such as Zambia and Sri Lanka have faced unusual delays in receiving IMF bailouts as China and Western economies clash over debt relief mechanisms. Sri Lanka has been waiting for almost 187 days to finalize the bailout after reaching a staff-level agreement with the IMF.
That compares with the average of 55 days it took over the past decade for low- and middle-income countries to go from initial deal to board sign-off, according to public data on more than 80 cases. Reuters.
Chinese Foreign Minister Qin Geng said on Tuesday that his country will continue to constructively participate in the resolution of international debt issues.
In response to a question on the sidelines of the annual parliament session in Beijing, Qin also said China should be the last country to accuse other countries of ensnaring them in a debt trap and called on other parties to share the burden.