President Ranil Wickremesinghe said that he expects the IMF staff-level agreement to be reached by the end of August, after which the country would be able to hold further talks with sovereign bondholders and bilateral creditors.
Any preliminary agreement would still require IMF board approval for the disbursement of funds, a process that could take months, the President said.
“I think we’ve already hit the bottom,” Wickremesinghe said in an interview on Sunday with The Wall Street Journal. “I can see the light at the end of the tunnel; it’s how fast we can get to it.”
He also acknowledged that it will take months before most Sri Lankans, who have faced runaway inflation and long queues for fuel and cooking gas, will begin to see their economic circumstances improve markedly.
“We are down to the nitty-gritty,” he said. “We would have had it in July if it were not for the unstable political condition.”
Once an IMF agreement is in place, the country will have to work out debt restructuring with creditors with differing approaches, the President said.
“It’s an issue between the different approaches to debt relief between India and Japan on one side, supported by the U.S., and China on the other side,” he said.
“It’s a question of getting them to agree on one plan. It’s a question of how do you deal with the haircut? How do you deal with having new money given to pay off the old loans?”
Lanka needs to secure upwards of US$3 billion from other sources next year to help pay for key imports like fuel, food and fertilizers.
Mr. Wickremesinghe said he was keeping an eye on the process that unfolded in Zambia. Over the past two years, the African copper producer has been undergoing debt restructuring of US$17 billion in foreign-currency debt under a plan developed by Group of 20 countries during the pandemic and that China signed on to. The framework expects bilateral lenders and private lenders such as multinational banks to accept similar write-downs but is meant to aid the world’s poorest nations, which doesn’t include Sri Lanka.
