Bankrupt Sri Lanka pleads with creditors for quick debt deal

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COLOMBO: Crisis-hit Sri Lanka pleaded on Friday (Sep 23) for a swift agreement with its international creditors to clear the way for a desperately needed US$2.9 billion IMF bailout.

The International Monetary Fund's board needs to ratify this month's staff-level agreement on the tentative US$2.9 billion lifeline conditional on Colombo striking a deal with creditors to restructure its debt.

After running out of foreign exchange to finance even the most essential imports, Sri Lanka in mid-April defaulted on its external debt. China is its largest single creditor.

The unprecedented foreign exchange crisis led to the fall of then-president Gotabaya Rajapaksa in mid-July after months of street protests.

His successor, Ranil Wickremesinghe, has taken a tough line against protesters, and has also eased some of the shortages by implementing fuel rationing.

He has also secured an agreement with the World Bank to divert funds meant for poverty relief to finance imports of life-saving medicines and equipment.

The country's 22 million people have endured galloping inflation, prolonged blackouts and acute shortages of food, fuel and medicines since late last year.

Sri Lanka's central bank, in its first virtual meeting with creditors on Friday, asked them for "financing assurances" - code for a reduction to the debt - but did not indicate how much was expected.

A presentation to creditors showed that the Central Bank of Sri Lanka expects "financing assurances from public and private partners" by mid-November.

The bank hopes final IMF board approval for the bailout can be obtained by mid-December, and urged creditors to organise themselves into an ad hoc group to negotiate collectively.

The creditor response was not immediately clear following the virtual meeting.

SOARING DEBT

Official data showed that Sri Lanka's bilateral debt was US$9.86 billion, with 52 per cent of it owned by China, followed by Japan at 19.5 per cent and India at 12.

International sovereign bonds amounted to US$19.2 billion. The island's total foreign currency denominated debt was US$46.6 billion, with some of i...

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