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IMF said to discuss SL loan approval even as China stalls

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The International Monetary Fund (IMF) is considering approving a loan for Sri Lanka, even without China’s assurance of debt-restructuring support, Bloomberg News reported on Friday.

Read Bloomberg full report

The International Monetary Fund is considering approving Sri Lanka’s bailout even without the formal assurance of debt-restructuring support from China, the nation’s biggest bilateral creditor, according to people familiar with the discussions.

Under a rarely used policy on lending into official arrears, the IMF may consider approving Sri Lanka’s loan because China’s assurance is the only prerequisite missing, according to the people who declined to be identified because the information isn’t public.

This provision is aimed at preventing a creditor from blocking assistance to a country in dire need of financing and has shown commitment to meet loan conditions.

An IMF spokesperson said that it’s premature to discuss the precise IMF policies that could be applied to lending to Sri Lanka, and that the nation’s authorities continue to seek financing assurances so that the fund’s executive board can consider their request for a loan. IMF staff also continue to engage with the Sri Lankan authorities who are working on completing upfront policy measures, the spokesperson said.

IMF Policy

The IMF can use the policy on lending into official arrears if it deems prompt financial support is essential and sees the country pursuing appropriate policies and making good-faith efforts to reach an agreement with creditors, according to an explanation on the fund’s website.

Moving forward with loan approval would be a shift from its position earlier this month, when it said the approval of Sri Lanka’s $2.9 billion Extended Fund Facility will depend on whether the nation can secure assurances from all bilateral creditors. 

The development comes as World Bank President David Malpass said Thursday that long extensions of debt are among the options that G-20 nations and others are considering to help ease the burden for poor countries.

The IMF, World Bank and Group of 20 nations chair India separately held virtual discussions Friday on global sovereign debt ahead of the finance ministers and central bank governors’ meeting in Bangalore next week.

Sri Lanka and Pakistan count on IMF loans to provide immediate relief by shoring up their foreign-currency reserves and unlocking more funding.

Pending China’s creditor assurance, Sri Lanka is trying to meet other reform conditions set by the IMF, including increasing electricity tariffs and clearing a new monetary law for parliament approval. The government may also loosen its grip on a currency band to meet the fund’s requirements.

The Paris Club — an informal group of rich, mostly western creditors — and India have provided formal support to Sri Lanka’s loan recast, leaving China as a holdout. 

China, which accounts for about 52% of the bankrupt nation’s bilateral debt, has instead offered term extensions via the state-owned Export-Import Bank.

Debt negotiations have dragged since Sri Lanka defaulted in May, causing severe supply shortage, depleting its foreign-currency reserves, sending inflation and borrowing costs soaring and pushing the economy into a recession.

While the nation has repurposed some funds to ease the shortage and damp price pressures, it would need IMF’s bailout and other funding to turn the situation around.

By  Ruchi Bhatia and Eric Martin
— With assistance by Anusha Ondaatjie and Asantha Sirimanne

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Samitha Dulan sets world record in Kobe

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Sri Lanka’s Samitha Dulan set a new world record in the Men’s Javelin Throw F44 category at the Kobe 2024 Para Athletics World Championships.

He also won Silver in the F64 category after recording a distance of 66.49 meters.

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Fmr. state minister Diana Gamage granted bail

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Former State Minister Diana Gamage has been released on bail after appearing before the Colombo Magistrate’s Court over allegedly obtaining a passport by producing false information.

She had arrived at the Colombo Magistrate’s Court earlier today over accusations of obtaining a passport by submitting false information.

The Criminal Investigations Department (CID) had yesterday submitted a report to the Colombo Chief Magistrate’s Court, naming the former State Minister as a suspect in the case pertaining to the obtaining of a diplomatic passport after providing false information.

Accordingly, the Colombo Chief Magistrate Thilina Gamage had ordered the CID to take appropriate measures and report back to the court.

(adaderana.lk)

(Except for the headline, this story, originally published by adaderana.lk has not been edited by SLM staff)

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New SL ambassador to China assumes duties

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The Ambassador-designate of Sri Lanka to the People’s Republic of China – Majintha Jayesinghe had assumed duties yesterday (May 20).

The post of the Sri Lankan ambassador to China was vacant for several months after the tenure of Dr. Palitha Kohona ended.

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