IMF temporarily approves $2.9 billion loan to Sri Lanka

Sri Lanka has reached an initial loan agreement with the International Monetary Fund (IMF) about $2.9 billion, the World Bank (WB) said in a statement on Thursday.

The agreement supports Sri Lanka Fund-supported program objectives to restore macroeconomic stability and debt sustainability, the statement added.

In addition to that, it aims to protect financial stability, reduce corruption-related vulnerabilities, and unlock Sri Lanka’s growth potential.

Sri Lanka needs to restructure nearly $30 billion in debt, and Japan has offered to lead talks with other major creditors, including India and China.

It will also need to come to terms with international banks and asset managers who hold the majority of the $19 billion worth of sovereign bonds, which are now classified as delinquent.

The transaction is subject to approval of IMF’s management and the executive board that is conditional on the Sri Lankan authorities’ compliance with previously agreed procedures.

IMF is also required to receive financing guarantees from Sri Lanka’s official creditors, in addition to ensuring that efforts are made to reach a cooperative agreement with private creditors.

IMF program aims to increase government revenues to support fiscal consolidation, introduce new prices for fuel and electricity, and increase social spending.