The Official Creditor Committee (OCC) has confirmed its in-principle agreement on specific financing terms to restructure Sri Lanka’s debt in line with the parameters set in the IMF program, Finance State Minister Shehan Semasinghe says.

Following the launch of a common platform in April 2023 for talks among bilateral creditors to coordinate restructuring of Sri Lanka’s debt, the OCC – co-chaired by India, Japan and France (as the chair of the Paris Club) – was formally formed on May 09 with 17 countries to respond to the Sri Lankan authorities’ request for a debt treatment. Since its formation, the OCC has engaged extensively with the Sri Lankan authorities, the IMF, the World Bank as well as China, and Sri Lanka’s private creditors.

In a post on X (formerly Twitter), Semasinghe said this is a ‘very significant milestone’ while referring to a similar in-principle agreement previously provided by China’s Export-Import (Exim) Bank.

This confirms that all official creditors have agreed to restructure Sri Lanka’s debt, which is a major step in the resolution of Sri Lanka’s economic crisis, the lawmaker emphasized.

He mentioned that the OCC’s agreement now paves the way for the IMF’s Executive Board to consider the first review of Sri Lanka’s Extended Fund Facility (EFF) program and unlock the next tranche of the loan which is expected in December and in turn would enable the World Bank and Asian Development Bank (ADB) to provide further financing.

Semasinghe also noted that this is another important indicator of the continued cooperation and support of the global community in Sri Lanka’s economic recovery.

“Sri Lanka remains committed to implementation of the comprehensive reform program that will restore macroeconomic stability and firms place the country on a path of sustainable and inclusive economic growth. Subsequently, Sri Lanka through its financial advisors, will continue to engage with its external private sector creditors in order to reach similar agreement in principle,” Semasinghe asserted.

Meanwhile, in its statement on the in-principle deal reached with Sri Lanka on debt restructuring, the OCC said it has come to an agreement with Sri Lanka on the main parameters of a debt treatment consistent with those of the EFF arrangement between the island nation and the IMF.

The OCC has commended the Sri Lankan authorities for their continuous efforts in implementing the reforms necessary for their country’s return to a sustainable path.

Attached below is the Official Creditor Committee’s statement on the agreement:

Following the launch event in April 2023, 17 countries formally formed, on May 9, an Official Creditor Committee (OCC) co-chaired by India, Japan and France (as chair of the Paris Club) to respond to the Sri Lankan authorities’ request for a debt treatment. The committee includes India and Hungary in addition to Paris Club creditors. Since then, the OCC has engaged extensively with the Sri Lankan authorities, the IMF, the World Bank as well as China, and Sri Lanka’s private creditors.

The OCC and Sri Lanka agreed on the main parameters of a debt treatment consistent with those of the Extended Fund Facility (EFF) arrangement between Sri Lanka and the IMF. This agreement will allow the IMF staff to present to the IMF Executive Board the first review of Sri Lanka’s EFF arrangement and open the way for approval of the second disbursement under the arrangement. The OCC commends the Sri Lankan authorities for their continuous efforts in implementing the reforms necessary for their country’s return to a sustainable path.

The OCC stands ready and looks forward to formalizing this agreement in the coming weeks in a Memorandum of Understanding with the Sri Lankan authorities. The OCC expects other bilateral creditors to consent to sharing, in a transparent manner, the information necessary for the OCC to evaluate comparability of treatment regarding their own bilateral agreement. The OCC also expects that the Sri Lankan authorities will continue to engage with their private creditors to find as soon as possible an agreement on terms at least as favourable as the terms offered by the OCC.

These engagements will ensure that the overall debt treatment granted to Sri Lanka is consistent with the IMF program parameters.