Nov 18, Colombo: Governor of Sri Lanka’s Central Bank Dr. Nandalal Weerasinghe has stated that the agreed terms for the restructuring of a US$ 4.2 billion debt given to Sri Lanka by China Exim Bank have been disclosed to other creditors and the International Monetary Fund (IMF).
In an interview with Bloomberg on Thursday, Dr. Weerasinghe has said he hopes the official creditors committee, which is led by Japan, India and the Paris Club of nations, will now propose an agreement to restructure Sri Lanka’s debt and the move will allow the IMF to approve the $330 million second tranche of the US$ 3 billion Extended Fund Facility before the end of the year.
“We hope the official creditors will also respond with their support so that we can go ahead” with the IMF’s funding program, he said. He didn’t disclose the terms of the China deal in the interview.
Sri Lanka has also received a debt restructuring proposal from a group of dollar bondholders, which didn’t get the backing of the government. Weerasinghe said the authorities continue to engage with commercial lenders, who may also be waiting to assess the debt proposal from bilateral creditors.
The governor has also commented that Sri Lanka is well in line with targets set out in the IMF program, including building foreign exchange reserves and central bank credit to the government.
Dr. Weerasinghe has said that he would like to see reserves increased to about 3 months of import cover, but may not be as much as the IMF is recommending as the country intends to eventually move toward a fully floating exchange rate.
The governor has reiterated that the central bank was leaving the exchange rate to market forces while only intervening to smooth volatility and accumulate reserves when the opportunity provided.
He further has said that the monetary policy transmission would speed up, and the gap between policy and market rates would narrow, once uncertainties over the debt restructuring are cleared.