Sri Lanka receives guarantees from China to restructure its debt

China’s state-owned Exim Bank gave Sri Lanka written guarantees to support the island nation’s debt restructuring, a step required to secure a bailout from the International Monetary Fund (IMF), Sri Lankan President Ranil Wickremesinghe announced on Tuesday.

“Now our homework is done. I hope that before the end of the month, in the fourth week, the IMF will fulfill its duty. After that, we will receive the first round of money from the World Bank and the Asian Development Bank,” Wickremesinghe told Parliament.

Upon receiving the letter from the Export-Import Bank of China, Sri Lanka’s main bilateral creditor, the president said he had forwarded the agreement to the IMF, in an attempt to finalize the $2.9 billion loan that has been long-negotiated between the authorities of the island and the financial entity.

Although the bailout figure was agreed in September, its implementation was pending approval by the IMF management, as well as Sri Lanka offering financial guarantees from official creditors.

This economic aid also requires the approval of a package of measures by the island that includes a tax reform, an increase in fuel and electricity prices, among other policies, aimed at increasing their meager income.

Hit by the worst economic crisis in its history, Sri Lanka requested IMF assistance in March last year, weeks before it was forced to temporarily suspend payments on its external debt, with foreign exchange reserves at minima.

Sri Lanka’s main foreign lenders are the World Bank and the Asian Development Bank, and among the bilateral loans between countries, Japan, China and India stand out, which have already confirmed their support for the neighboring country for its debt restructuring

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