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Sri Lanka Receives Financing Assurances from Paris Club to Secure IMF Deal

Sri Lanka Receives Financing Assurances from Paris Club to Secure IMF Deal

The Paris Club of creditors has given financing assurances to support the International Monetary Fund’s approval of an extended fund facility for Sri Lanka. The South Asian island nation of 22 million people secured a preliminary deal with the IMF in September, though no funds have been disbursed yet because the bailout has to be approved by the Fund’s board. The assurances from the Paris Club, which includes Japan, Sri Lanka’s second biggest bilateral lender, was previously reported by Reuters. The Paris Club statement said that its members, jointly with Hungary, expressed their full commitment to negotiate with Sri Lanka terms of a restructuring, while Saudi Arabia supported the process but “acknowledged the importance to offer financing assurances in the near future.”

To unlock the IMF’s cash disbursements, the Colombo government first needs to secure financing assurances from key bilateral lenders such as Japan, India, and China. While India committed to helping ease the debt burden of its neighbor as part of the IMF program, China’s EximBank only offered a two-year moratorium, a move that indicates willingness to support a debt recast but is not enough, according to U.S. Under Secretary of State for Political Affairs Victoria Nuland. The United States has the biggest share of IMF votes.

China and India are not Paris Club permanent members. An IMF spokesperson did not immediately respond to a request for comment. “Members further expressed appreciation for the specific and credible financing assurances issued by India on Jan. 16, 2023, and its coordination with the Paris Club,” the group’s statement added. “The Paris Club members as well as Hungary and Saudi Arabia urged other official bilateral creditors, including China, to do the same in line with IMF program parameters as soon as possible.”

A group of overseas private creditors said on Friday that it was also ready to engage “quickly and effectively” with the Sri Lankan authorities on debt rework talks consistent with the IMF’s program. Sri Lanka has to restructure debt payments of about $13 billion on 11 international bonds. The group of at least 30 private creditors represents around 60% of all international bondholders. Global investment companies Amundi Asset Management, BlackRock, HBK Capital Management, Morgan Stanley Investment Management, and T. Rowe Price Associates Inc. are among the group members.

The assurances from the Paris Club are crucial to unlocking a $2.9 billion deal from the IMF, which is still pending executive board approval. The Paris Club members, as well as Hungary, Saudi Arabia, and India, continue to look forward to working together along with all bilateral creditors and to engage with other key stakeholders in order to proceed with a comparable debt restructuring as soon as possible, the informal group of creditors said in a separate statement on Tuesday.

Sri Lanka is facing a debt crisis with a debt-to-GDP ratio of over 100%, and the government is struggling to make repayments. The pandemic has worsened the situation, with the economy contracting by 3.6% in 2020. The IMF program aims to help Sri Lanka restore macroeconomic stability, promote sustainable and inclusive growth, and address the country’s balance of payments difficulties.

In conclusion, the financing assurances from the Paris Club of creditors and other bilateral lenders are crucial in unlocking a $2.9 billion deal from the IMF for Sri Lanka, which is facing a significant debt burden. The country has secured a preliminary deal with the IMF, but needs financing assurances from key bilateral lenders such as Japan, India, and China to unlock the funds. While India has committed to helping ease the debt burden, China’s support has been limited, and the country is facing mounting external debt repayments in the coming years. With the government acknowledging the need for fiscal consolidation and structural reforms, the negotiations with the IMF and other creditors will be critical in helping put Sri Lanka on a more sustainable path. While the outcome remains uncertain, the financing assurances from the Paris Club and other creditors provide hope that a resolution can be reached that will provide some relief to Sri Lanka’s debt burden and help support the country’s economic recovery.

Andrew Johnson is a seasoned journalist with a keen interest in the commodity market. He is a regular contributor to, where he covers the latest news, trends, and analysis related to the commodity industry. With years of experience under his belt, Andrew has established himself as a reliable source of information on the global commodity market.

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