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LONDON: Sri Lanka expects the International Monetary Fund board to approve a $2.9 billion loan by year-end, officials from the country’s central bank told investors during a virtual presentation on Friday, sources participating in the event said.

Sri Lanka is struggling with its worst economic crisis in more than seven decades, which has led to shortages of essentials and the ouster of a president.

The country expects to start talks with private and official creditors after the IMF board approval of the loan, which is expected by mid-December.

India plans no more funding for Sri Lanka as IMF talks progress

It aims to reach agreements in principle with all the creditors between the last quarter of the year and the second quarter of 2023, the sources participating in the event said.

The country earlier this month reached a preliminary deal with the IMF for the loan of about $2.9 billion, contingent on it receiving financing assurances from official creditors and negotiations with private creditors.

The virtual presentation to investors on Friday marks the first time the Sri Lankan government has formally engaged with private bondholders after deciding earlier this year that it would restructure $13 billion in international sovereign bonds, held by private creditors, such as asset managers BlackRock and Ashmore.

Central Bank Governor Nandalal Weerasinghe and the Treasury Secretary Mahinda Siriwardena participated in the virtual presentation, along with representatives of financial and legal advisers Lazard and Clifford Chance.

Sri Lanka and IMF reach preliminary agreement for $2.9 billion loan

Bilateral debt talks

Sri Lanka also needs to renegotiate debt with bilateral creditors such as China, Japan and India. The sources attending the presentation said Sri Lankan government officials said the country is encouraging an ad-hoc bilateral creditor coordination platform to obtain financing assurances from official bilateral creditors.

As a middle-income country, according to the World Bank, Sri Lanka is not able to engage in talks with bilateral creditors under the G20 common framework for debt treatments.

The sources said a representative from Lazard, which is advising the government, said that this initiative would resemble the G-20 platform. It will offer equal footing for creditors to access relevant information and a forum to discuss emergency credit lines, the presentation showed, according to the sources.

Sri Lanka says IMF bailout talks in ‘final stage’

Sri Lanka’s total foreign currency debt of $38.7 billion amounts to 48.2% of GDP, the latest IMF report showed in March.

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