The International Monetary Fund said it will need “adequate assurances” from Sri Lanka’s creditors for a new program as it prepares a visit to Colombo later this month.

The goal of the visit is to make progress on a staff-level agreement for an aid package “in the near term,” to help the island nation weather a severe economic crisis, the IMF said on Friday.

Staff from the global lender will be in Colombo from August 24 to 31, the IMF said.

“Because Sri Lanka’s public debt is assessed as unsustainable, approval by the IMF Executive Board of the Extended Fund Facility program would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored,” the IMF said.

Reuters reported on Thursday that Sri Lanka will ask Japan to invite the Indian Ocean island’s main creditor nations, including China and India, to talks on bilateral debt restructuring.

The loan package being negotiated with the IMF is for between $2 billion and $3 billion according to President Ranil Wickremesinghe, who said he would present an interim budget in September focusing on fiscal consolidation measures agreed with the IMF.

The country of 22 million people is facing its most severe financial crisis since independence from Britain in 1948, resulting from the combined impact of the COVID-19 pandemic and economic mismanagement.

Ordinary Sri Lankans have been battling shortages for months amid crippling inflation and a devalued currency, stoking unprecedented mass protests. Thousands of people stormed the colonial-era presidential residence in Colombo, the commercial capital, in early July.

Sri Lanka’s total bilateral debt earlier this year was estimated at $6.2 billion as of the end of 2020 by the IMF. It also has $14 billion of international sovereign bond debt.

Source: Reuters