IMF reach preliminary deal of $2.9 billion on bankrupt Sri Lanka

The IMF says it has reached a preliminary agreement with Sri Lanka on a four-year, $2.9bn bailout package aimed at restoring economic stability and debt sustainability for the bankrupt south Asian island nation. 

The IMF offered the first indication of a path out of insolvency for the nation,  which has run out of cash and suffered insuperable shortages of fuel and essentials this year. 

However, the multilateral lender said the staff-level agreement was subject to approval by its management and executive board and contingent on Sri Lanka securing debt relief from creditors and financing from multilateral lenders, as well as undertaking steps to reform its economy and improve governance.

 “Because Sri Lanka’s debt is assessed to be unsustainable, debt relief from Sri Lanka’s creditors will be required to assure debt sustainability,” said Peter Breuer, the IMF’s senior mission chief for the country. 

“Having a path to restore debt sustainability — so-called financing assurances — is necessary for approval by the IMF executive board, and additional financing from multilateral partners will be needed to close financing gaps.” Sri Lanka this year became the first Asian nation in decades to default on its external debt of $51bn, about half of which is held by private bondholders.