- External financing gap of $ 25 bn aimed to be closed
- $ 3.37 bn debt reduction in 2023, another $ 3.32 bn next year
Sri Lanka is looking for a debt reduction of approximately $ 17 billion between the 2023-2027 period as the country is looking to close an external financing gap of $ 25.1 billion, International Monetary Fund (IMF) said.
According to the IMF staff’s baseline scenario, $ 16.9 billion in debt reduction is required during the 2023-27 period, including the arrears accumulated amounting to $ 2.8 billion in 2022, for Sri Lanka to close the external financing gap of $ 25.1 billion.
Sri Lanka has been in arrears to external private creditors since the April 2022 moratorium, including $ 1,633 million to International Sovereign Bond (ISB) holders, $ 338 million to China Development Bank (CDB), and $ 7 million to other foreign commercial creditors as of December 2022.
Meanwhile, the Exim Bank of China’s financing assurances also include a moratorium on debt service payments due through 2023.
Based on the IMF calculations, Sri Lanka is expecting a $ 3.37 billion debt reduction in 2023 and $ 3.32 billion in 2024.
During the Extended Fund Facility (EFF) programme (2023-27), the official programme financing will include about $ 3 billion from the IMF over four years, and $ 3.75 billion from other multilateral institutions.
Moreover, the IMF statement said that China has consented to fund financing notwithstanding arrears to the Chinese Government and the China Export and Credit Insurance Corporation (the guarantor for several Chinese commercial loans that are in default). Sri Lanka also owes official arrears to Iran, Kuwait, Pakistan, and Saudi Arabia. All four need more time to consider consenting to Fund financing notwithstanding these arrears.
Also, it said that the monetary financing ceiling set by the IMF on the Central Bank until June 2023, is set at the level recorded at the end of January 2023, and that ceiling will be reduced further by another Rs 150 billion in H2 2023.
However, the statement said that a programme adjustor will be introduced to allow monetary financing in the case of a potential shortfall in external program financing in the first six months of the EFF programme.