Paris Club of Creditors give assurances to Sri Lanka

Paris Club of Creditors give assurances to Sri Lanka

Tourists can visit the Galle Face Green promenade in Colombo on January 13, 2023. The Paris Club of creditors has given assurances that the International Monetary Fund has approved an extended fund facility for Sri Lanka, the Sri Lankan president's office said on Tuesday.

The executive board approval is still pending, but assurances are crucial for unlocking a $2.9 billion deal from the IMF.

The informal group of creditors said on Tuesday that the Paris Club members, as well as Hungary, Saudi Arabia and India continue to look forward to working together with all bilateral creditors and to engage with other stakeholders in order to proceed with a debt restructuring as soon as possible.

The financing assurances from the Paris Club, which includes Japan -- Sri Lanka's second biggest bilateral lender, was previously reported by Reuters.

The Paris Club statement said that its members, along with Hungary, expressed their full commitment to negotiate with Sri Lankan terms of a restructuring, while Saudi Arabia supported the process but acknowledged the importance of financing assurances in the near future. A South Asian island nation of 22 million people secured a preliminary deal with the IMF in September, but there are no funds yet that have been disbursed because the bailout has to be approved by the Fund's board.

While India pledged to help ease the debt burden of its neighbour as part of the IMF programme, China's EximBank offered a two-year moratorium, a move that indicates willingness to support a debt recast but is not enough, according to the US Under Secretary of State for Political Affairs Victoria Nuland. The United States has the largest share of the votes of the International Monetary Fund.

An IMF spokeswoman didn't respond immediately to a request for comment.

Members expressed appreciation for the specific and credible financing assurances issued by India on Jan 16, 2023 and its coordination with the Paris Club, according to the statement.

The Paris Club members as well as Hungary and Saudi Arabia urged other official bilateral creditors, including China, to do the same in line with the IMF program parameters as soon as possible. READ MORE: Sri Lanka's crisis pushes war-shattered Tamils to the brink.

A group of overseas private creditors said on Friday that they were ready to engage quickly and effectively with the Sri Lankan authorities on debt rework talks, consistent with the IMF's programme. Sri Lanka has to restructure debt payments of around $13 billion on 11 international bonds.

Around 60 percent of the world's bondholders are represented by a group of at least 30 private creditors.

Among the group are Amundi Asset Management, BlackRock, HBK Capital Management, Morgan Stanley Investment Management and T. Rowe Price Associates Inc.