The managing director of the International Monetary Fund, Kristalina Georgieva, says that the countries facing the debt crisis will be pressured to create a more efficient debt resolution mechanism. She made these comments at a press conference held in conjunction with the annual session of the International Monetary Fund and the World Bank in Washington.
She had further commented on the measures to be taken regarding the countries facing the debt crisis, including Sri Lanka.
“We are pushing for a more efficient debt resolution mechanism. What we need is a common mechanism with equal treatment for all public and private sector creditors, with guidance that can make certain predictions. Also, we are considering expanding such coordination of lenders to middle-income countries like Sri Lanka.”
“So we have a lot to do this week. We need to recognize the urgent need and realize that working together can make a difference in the lives of millions of people.” she stated.
Meanwhile, it is reported that both parties have not informed their position on the request made by the “Paris Club” to China and India to support Sri Lanka’s debt restructuring.
China and India do not belong to the list of members of the Paris Club. One of the main conditions for getting Sri Lanka’s USD 2.9 billion comprehensive funding facility from the International Monetary Fund is to get the country’s bilateral creditors to agree on debt restructuring. The Paris Club, which has been established to offer sustainable solutions to overcome the difficulties faced by debt-ridden countries, has now intervened to support Sri Lanka.
Accordingly, the Paris Club had requested China and India to support Sri Lanka’s debt restructuring. Reuters reports that the Paris Club has asked those countries to work in close coordination with Sri Lanka on this issue.
Sri Lanka’s major bilateral creditors are China, India and Japan. Japan had already announced that it was ready to support Sri Lanka’s debt crisis.
Meanwhile, President Ranil Wickramasinghe recently stated that the Sri Lankan government has started debt restructuring talks with China, which is an important step for the International Monetary Fund’s program to rebuild the country which is facing a severe economic crisis.
Beijing’s role in Sri Lanka’s negotiations has become a gauge of how lenders respond to rising global debt stress.
“China has supported us since ancient times and we believe they will do the same in these difficult times,” Wickramasinghe said.
China, which has loaned Sri Lanka about $7 billion through its Belt and Road infrastructure project, has not responded favorably to Sri Lanka’s earlier requests to restructure the debt or provide significant new aid. China has agreed to help Sri Lanka deal with the economic crisis, but so far has not agreed to any debt restructuring plan.
Sri Lanka has reached a preliminary agreement with the International Monetary Fund for a comprehensive loan package of $2.9 billion over four years, but its completion is dependent on assurances from creditors on Sri Lanka’s debt restructuring.
Governor of Central Bank of Sri Lanka, Nandalal Weerasinghe said in a news conference last week that steps have been taken to restructure the debt.
Sri Lanka has taken large loans from China in the last decade for infrastructure projects including a port and an airport. The projects failed to generate enough revenue to service the debt, leading to Sri Lanka’s economic crisis.
China is not Sri Lanka’s biggest creditor. It is about 10% of Sri Lanka’s debt after Japan and the Asian Development Bank. However, Beijing’s approval of its debt restructuring is crucial. Although additional credit was provided, China has not agreed to any restructuring.
