Colombo

Sri Lanka has reached a preliminary agreement with China's EXIM bank on its (Sri Lanka's) debt treatment. In a statement on Wednesday (Oct 11), Sri Lanka's finance ministry said that the agreement covers approximately $4.2 billion of outstanding debt. "It constitutes a key step towards restoring Sri Lanka’s long-term debt sustainability and will pave the way to a prompt economic recovery," the statement said.

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The indicative terms agreed would provide the necessary fiscal space for Sri Lanka to implement its ambitious reform agenda, the statement added. Colombo hoped that this achievement would anchor its ongoing engagement with the Official Creditor Committee and commercial creditors, including the bondholders.

"It should also facilitate approval by the IMF Executive Board of the first review of the IMF (International Monetary Fund)-supported programme in the coming weeks, allowing for the next tranche of IMF financing of about US$334 million to be disbursed," the statement further said. 

The agreement on Sri Lanka's debt treatment came as President Ranil Wickremesinghe will visit China next week. President Wickremesinghe has been leading his country's push to manage its heavy debt and keep funds flowing from a $2.9 billion IMF programme.

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Wickremesinghe is expected to meet Chinese President Xi Jinping and could also meet China's finance and foreign ministers, the news agency Reuters reported on Friday citing a source. 

Sri Lanka defaulted on its foreign debt in May last year after its dollar reserves fell to a point where the country could no longer pay for essential imports like fuel and medicine.

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