sri-lanka-continues-to-honor-multilateral-debt-despite-default-announcement

In a press briefing held on Thursday, Sri Lanka's State Minister of Finance, Ranjith Siyambalapitiya, asserted that despite the country's announcement of default in 2022, it has adhered to stringent financial measures while making tough decisions aimed at strengthening economic recovery.

 

Siyambalapitiya revealed that the nation successfully serviced its multilateral debt obligations, amounting to USD 2.5 billion in 2022 and USD 2.6 billion in 2023, to institutions like the International Monetary Fund (IMF), World Bank, and the Asian Development Bank. 

 

The default declaration in mid-2022 affected only bilateral external debt payments.

 

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

 

Despite these efforts, discussions with sovereign bondholders to restructure approximately USD 46 billion of debt are ongoing. However, progress has faced hurdles, as the IMF rejected a proposal from private bondholders in March, citing misalignment with desired debt sustainability parameters.

 

A subsequent proposal in April is currently under review, with parties aiming to reach an agreement by June.

 

The outcome of debt restructuring discussions holds significant weight, particularly in an election year for Sri Lanka, with scheduled elections slated for the last quarter of the year.

 

President Ranil Wickremesinghe, a proponent of IMF-led reforms, has emphasized their necessity for economic recovery.

 

Wickremesinghe's administration has overseen a USD 2.9 billion IMF bailout spanning over four years.

 

However, the opposition has taken a contrasting stance, pledging to renegotiate the terms of the IMF bailout to alleviate economic burdens faced by the public amidst the ongoing crisis.

 

Critics, including the opposition, attribute economic hardships to the IMF-prescribed reforms and hold Wickremesinghe, also serving as the finance minister, accountable for intensifying public woes through these policies.