Sri Lanka Prioritizes Servicing Multilateral Loans Amidst Default

Sri Lanka maintains financial discipline, servicing multilateral debt despite its 2022 default. Despite unpopular decisions, authorities prioritize economic recovery and continue repaying debt to organizations like IMF, World Bank, and Asian Development Bank. Bilateral debt payments remain suspended. Negotiations for restructuring $46 billion sovereign bond debt are ongoing with bondholders. The outcome of negotiations and the future of the IMF bailout program are crucial in the upcoming election year, with the opposition seeking to adjust the program for public relief.

Sri Lanka has maintained strict financial discipline while taking unpopular decisions to facilitate economic recovery and continues to service its multilateral debt despite the default announced in 2022, state minister of finance Ranjith Siyambalapitiya said on Thursday.

He said USD 2.5 billion debt in 2022 and USD 2.6 billion debt in 2023 had been repaid to multilaterals such as the International Monetary Fund (IMF), World Bank and the Asian Development Bank. Only the bilateral external debt payments had been suspended with the announcement of the debt default in mid-2022.

"We have maintained strict financial discipline while taking unpopular decisions to facilitate economic recovery,'' Siyambalapitiya said.

Meanwhile, the official sources said the talks with sovereign bondholders to restructure about USD 46 billion debt are being continued.

The IMF had rejected a proposal by the private bondholders in March claiming it was not in line with the debt sustainability sought by them.

The latest proposal made in April is still being studied to reach an agreement by June.

The debt restructuring and the future of the IMF programme which allowed a USD 2.9 billion bailout for over 4 years would be crucial in this election year.

The election in Sri Lanka must be held in the last quarter of this year.

President Ranil Wickremesinghe, who steers the IMF programme, is insistent that reforms suggested by the IMF are vital for economic recovery.

However, the main opposition has vowed to rework the IMF bailout to provide economic relief to the public hit by the economic crisis.

They blame Wickremesinghe, also the finance minister, for heaping hardships on people through the IMF-dictated reforms.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)