Sri Lanka bankrupt begs creditors for quick debt deal

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COLOMBO: Crisis-stricken Sri Lanka on Friday (September 23) called for a quick deal with its international creditors to pave the way for a much-needed $2.9 billion IMF bailout.

The International Monetary Fund board is due this month to ratify the staff-level agreement on the $2.9 billion tentative lifeline, provided Colombo strikes a deal with creditors to restructure its debt.

After Sri Lanka ran out of foreign exchange to finance even its most essential imports, Sri Lanka defaulted on its external debt in mid-April. China is the largest single creditor.

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The unprecedented currency crisis led to the fall of then-President Gotabaya Rajapaksa in mid-July after months of street protests.

His successor, Ranil Wickremesinghe, has stood up to protesters and has also reduced some of the shortages by introducing fuel rationing.

He has also reached an agreement with the World Bank to convert funds intended for poverty alleviation into imports of life-saving drugs and equipment.

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Since late last year, the country’s 22 million residents have faced galloping inflation, prolonged power outages and acute shortages of food, fuel and medicine.

Sri Lanka’s central bank at its first virtual meeting with creditors on Friday asked for “funding guarantees” – code for debt reduction – but did not specify how much of it was expected.

A presentation to creditors revealed that the Central Bank of Sri Lanka expects “funding guarantees from public and private partners” by mid-November.

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The bank hopes final approval from the IMF board of directors for the bailout can be obtained by mid-December, and urged creditors to organize into an ad hoc group to negotiate collectively.

The creditor’s response was not immediately apparent after the virtual meeting.

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