Sri Lanka is tangled in the worst financial crisis in over seven decades, triggered by a severe shortage of foreign exchange that forced the country to annouce a suspension of foreign debt repayments in April 2022.

Sri Lanka’s cabinet has approved loan repayments worth $2.6 billion in the first half of this year, in line with its debt suspension plans, its cabinet spokesperson said on Tuesday.

The island of 22 million people is tangled in the worst financial crisis in over seven decades, triggered by a severe shortage of foreign exchange that forced the country to annouce a suspension of foreign debt repayments in April 2022.

However, Sri Lanka will continue to repay multilateral loans from several organisations including the World Bank and Asian Development Bank, cabinet spokersperson and Transport Minister Bandula Gunawardana told reporters.
The loan repayments will include $2 billion in foreign loan repayments and $540 million in interest payments.

Repayments will also include $709 million in dollar-denominated Sri Lanka Development Bonds and $46 million in interest payments, Gunewardana added.

Sri Lanka signed a preliminary agreement for a $2.9 billion bailout with the International Monetary Fund (IMF) last September but has to put its debt on a sustainable path before disbursements can begin.

“Talks with the IMF are at the final stage but they have not been concluded so it is imperative that public finances are handled carefully. These debt repayments will be done within the borrowing limits set in the budget for 2023,” Gunawardana said.

India and Paris Club members have declared support to help Sri Lanka’s debt restructuring but the island is still in negotiations with China, which is the largest bilateral lender, for simmilar financing assurances, Gunawardana said.

Source - Reuters
-Agencies