Feb 7 (Reuters) - The Paris Club of creditors has given financing assurances to support the International Monetary Fund's approval of an extended fund facility for Sri Lanka, the Sri Lankan president's office said on Tuesday.
The assurances are crucial to unlocking a $2.9 billion deal from the IMF, which is still pending executive board approval.
"Paris Club members as well as Hungary, Saudi Arabia and India continue to look forward to working together along with all bilateral creditors and to engage with other key stakeholders in order to proceed with a comparable debt restructuring as soon as possible," the informal group of creditors said in a separate statement on Tuesday.
The financing assurances from the Paris Club, which includes Japan - Sri Lanka's second biggest bilateral lender - was previously reported by Reuters.
The Paris Club statement said that its members, jointly with Hungary, expressed their full commitment to negotiate with Sri Lanka terms of a restructuring, while Saudi Arabia supported the process but "acknowledged the importance to offer financing assurances in the near future."
The South Asian island nation of 22 million people secured a preliminary deal with the IMF in September, though no funds have been disbursed yet because the bailout has to be approved by the Fund's board.
To unlock the IMF's cash disbursements, the Colombo government first needs to secure financing assurances from key bilateral lenders such as Japan, India and China.
While India committed to helping ease the debt burden of its neighbour as part of the IMF programme, China's EximBank only offered a two-year moratorium, a move that indicates willingness to support a debt recast but is not enough, according to U.S. Under Secretary of State for Political Affairs Victoria Nuland. The United States has the biggest share of IMF votes.
China and India are not Paris Club permanent members.
An IMF spokesperson did not immediately respond to a request for comment.
"Members further expressed appreciation for the specific and credible financing assurances issued by India on Jan. 16, 2023 and its coordination with the Paris Club," the group's statement added.
"The Paris Club members as well as Hungary and Saudi Arabia urged other official bilateral creditors, including China, to do the same in line with IMF program parameters as soon as possible."
A group of overseas private creditors said on Friday that it was also ready to engage "quickly and effectively" with the Sri Lankan authorities on debt rework talks consistent with the IMF's programme. Sri Lanka has to restructure debt payments of about $13 billion on 11 international bonds.
The group of at least 30 private creditors represents around 60% of all international bondholders.
Global investment companies Amundi Asset Management, BlackRock, HBK Capital Management, Morgan Stanley Investment Management and T. Rowe Price Associates Inc. are among the group members.
https://www.reuters.com/markets/asi...rances-back-imf-bailout-sri-lanka-2023-02-07/
Paris Club, Hungary says provided Sri Lanka debt assurances, urges China to follow
Tuesday February 7, 2023 8:14 pm
ECONOMYNEXT – Paris Club of Western lenders said the group, along with ad-hoc member Hungary has given financial assurances to re-structure debt within the parameters of an agreement with the IMF, and Saudi Arabia will do so soon.
China has communicated to Sri Lanka that is was willing to negotiate during a offering a two year moratorium, but the IMF has not yet said it in line with the island’s debt parameters of an program with the island. India’s assurances have been accepted.
“The Paris Club members as well as Hungary and Saudi Arabia urged other official bilateral creditors, including China, to do the same in line with IMF program parameters as soon as possible,” the group said.
The full statement is reproduced below:
Paris Club Creditors provide financing assurances to support the International Monetary Fund’s approval of an Extended Fund Facility for Sri Lanka
1. Paris Club members held a meeting on January 25, 2023, in the presence of representatives from Hungary, Saudi Arabia, the Kuwait Fund for Arab Economic Development and India, as well as from the International Monetary Fund and the World Bank, to provide financing assurances to support the approval by the IMF Executive Board of the envisaged IMF program for Sri Lanka, which would allow to restore the country’s macroeconomic stability.
2. They examined the macroeconomic and financial situation of Sri Lanka, including its long-term debt sustainability, and the need for a debt treatment by all bilateral creditors to both fill the financing gap and to ensure Sri Lanka’s debt sustainability in line with the proposed Extended Fund Facility.
3. We acknowledge that the Sri Lankan authorities had the opportunity to present Sri Lanka’s economic and financial situation to their creditors, which underscored the need for debt treatment from all creditors. They also presented their reform program that will be supported by an IMF arrangement requiring a debt treatment to restore debt sustainability, as well as the prior actions already implemented.
4. Paris Club members as well as Hungary, Saudi Arabia and India continue to look forward to working together along with all bilateral creditors and to engage with other key stakeholders in order to proceed with a comparable debt restructuring as soon as possible.
5. Shortly after the conclusion of a staff-level agreement between the Sri Lankan authorities and IMF staff on September 1, 2022, on a 48-month Extended Fund Facility arrangement, the Paris Club publicly stated its readiness to provide the necessary financing assurances in a timely manner and in coordination with other bilateral official creditors.
To this end, the Paris Club has been engaging proactively with Sri Lankan authorities, the IMF, and Sri Lanka’s other official bilateral creditors, including by sharing its technical analysis in order to enhance the bilateral official creditors’ collective understanding of the need for debt treatment.
6. To support the implementation of the envisaged IMF supported program and the Sri Lankan authorities’ efforts with other official bilateral creditors, Paris Club members, jointly with Hungary, expressed their full commitment to negotiate with Sri Lanka terms of a restructuring of their eligible claims, in accordance with the comparability of treatment principle among all bilateral creditors, and with the goal of restoring debt sustainability with due regard to targets and overall macroeconomic goals under the Extended Fund Facility.
Saudi Arabia expressed its support for the process and acknowledged the importance to offer financing assurances in the near future. Members further expressed appreciation for the specific and credible financing assurance s issued by India on January 16, 2023 and its coordination with the Paris Club.
The Paris Club members as well as Hungary and Saudi Arabia urged other official bilateral creditors, including China, to do the same in line with IMF program parameters as soon as possible.
7. Paris Club members further noted the Sri Lankan authorities’ commitment to seek from all its commercial creditors and other official bilateral creditors a debt treatment on terms at least as favorable, and to hold all creditors in arrears until a comparable debt treatment is provided.
- https://economynext.com/paris-club-...debt-assurances-urges-china-to-follow-111611/
------ Post added on Feb 7, 2023 at 10:51 PM
