The International Monetary Fund (IMF) has emphasized the critical need for high creditor participation in Sri Lanka’s ongoing debt restructuring operations, underscoring this as a vital step toward ensuring the success of the country’s ambitious economic reform program.

Kristalina Georgieva, Managing Director of the IMF, issued a statement on 26th November, addressing members of the financial community, highlighting Sri Lanka’s progress under the IMF-supported reform agenda and the importance of collective efforts to achieve sustainable debt levels.

“The Sri Lankan authorities have been implementing an ambitious economic reform program supported by the IMF, which aims to restore debt sustainability and external viability, underpin broad macroeconomic reforms, and strengthen economic governance and transparency,” Georgieva said.

The reform program, anchored by a 48-month Extended Fund Facility (EFF) arrangement of SDR 2.286 billion (approximately $3 billion), was approved by the IMF’s Executive Board in March 2023. Georgieva noted the program’s positive start, with signs of economic recovery, low inflation, and improved reserve accumulation.
Following the completion of two program reviews, IMF staff reached an agreement with Sri Lankan authorities on November 23, 2024, for a third review under the arrangement. This agreement builds on progress made in June, when Sri Lanka signed a memorandum of understanding with its Official Creditors Committee and finalized a deal with China EXIM Bank for debt treatment consistent with IMF program goals.

Georgieva described the recent agreements with the Steering Committee of the Ad Hoc Group of external bondholders and the Local Consortium of Sri Lanka as a “significant step forward.” These agreements, assessed by IMF staff, align with the parameters of the Fund-supported program and are expected to deliver meaningful external debt service relief.

“To capitalize on this momentum, rapid completion of the debt operation with high creditor participation would be vital for the success of the program,” Georgieva stressed. “In parallel, the authorities continue to finalize other remaining debt restructuring agreements. This collective effort is key to supporting the success of Sri Lanka’s debt restructuring efforts.”

Sri Lanka has reiterated its commitment to its reform agenda, which aims to restore sustained and high growth for the economy. Georgieva noted that continued support from international financial institutions, official creditors, and bondholders participating in debt exchanges is critical to ensure the reform program’s success.

The IMF reaffirmed its commitment to supporting Sri Lanka’s economic and social reform objectives, with Georgieva concluding, “The IMF remains a steadfast partner in supporting Sri Lanka and its people and stands ready to assist the country achieve its economic and social reform goals.”

The call for creditor participation comes as Sri Lanka navigates one of its most complex financial crises, with a focus on ensuring that debt sustainability is restored in line with the IMF’s program parameters.

[PMD]