The International Monetary Fund (IMF) is ready to support Sri Lanka’s discussions with international bondholders and provide a formal assessment after the parties reach a tentative agreement in principle.
Speaking to Reuters, a Spokesperson of the IMF has said they hope an agreement consistent with the parameters of the IMF-supported programme and official creditors’ Comparability of Treatment requirements can be reached soon between Sri Lanka and the bondholders, ahead of completing the second review under the programme the Spokesperson said.
On Tuesday (16), Sri Lanka announced that it failed to reach an agreement with bondholders to restructure about $ 12 billion, raising concerns there could be a delay in the island nation receiving a third tranche of its $ 2.9 billion IMF programme in June.
The Government said one of the main stumbling blocks had been that the ‘baseline parameters’ of the bondholders’ plan had not matched those embedded in its IMF programme.
“We encourage both parties to continue their discussions swiftly,” the IMF statement added.
Speaking at a webinar on Wednesday (17) former Central Bank of Sri Lanka (CBSL) Governor Dr. Indrajit Coomaraswamy said that Sri Lanka failed to reach an agreement with the bondholders on how to apply the upward and downward adjustments in the proposed Macro-Linked Bonds (MLBs).
He noted that the authorities have failed to reach an agreement with the bondholders on how to apply the upward or the downward adjustment in the MLBs and on the distribution of benefits if Sri Lanka outperforms the GDP projections.
However, he added that the condition attached to the Executive Board approval of the second review of the IMF is that there should be a demonstration of progress and continuing negotiations in good faith have been met as the authorities had an engagement and they are going to meet again.