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Before next IMF tranche, roadmap needs to be mapped out: President in Paris

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From the time Sri Lanka declared bankruptcy, there had been a delay in bureaucracy on both sides – the country, and the IMF – and if funding could have been secured by May 2022, the upheavals of July that year could have been avoided, President Ranil Wickremesinghe said in Paris this week.

He also revealed that, following the conclusions of negotiations with the IMF and the successful approval of the Extended Fund Facility (EFF), Sri Lanka has “no roadmap to follow regarding the next phase of debt restructuring”.

“So, before we can get to the next tranche from the IMF, it’s a question of us now mapping the road out,” he said.

The President was participating in a high-level panel discussion at the Global Leaders’ Summit for a New Global Financing Pact in the French capital on Thursday. It was moderated by Spanish Deputy Prime Minister Nadia Calvino who asked him for his views on Sri Lanka’s debt restructuring process and what he considered to be the main bottlenecks.

Mr Wickremesinghe pointed out that Sri Lanka “took ownership” of the restructuring process and also had two exceptional circumstances: India came to its help with US$ 4bn when no other funding was available; and Sri Lanka went through a process of reverse graduation with the World Bank and ADB that made it entitled, once again, to concessionary funding.

The country then undertook significant economic reform that imposed pain on the population, but without predictability. He called for automatic and timely access to concessional funding for middle-income countries (like Sri Lanka) under agreed criteria “if you fulfill the criteria”.

“The cost for us, economic and social, has been very high,” the President admitted. He said Sri Lanka has established an ad hoc platform for official creditors, including the Paris Club members and others. While India and Hungary were among those who participated in this platform, China, another major creditor, was present as an observer.

“What else helped us was that Sri Lanka has ongoing negotiations with Japan, India and China separately, regarding further trade integration and also some of the development programmes for the future,” he elaborated. “This assisted our process.”

“But as far as my experience is, we need, we have to have some improvement in the interaction between the committee and the debtors because the debt restructuring process is a negotiation and it should, in essence, be interactive,” he said. “Looking at the dealings with the Paris Club and non-Paris Club, we need a new approach because this is basically a geopolitical issue.”

“The mistrust between the US and China and the growing tension, it has to be addressed by all, not merely by Sri Lanka or the country concerned,” he asserted. “If you do not resolve it, I think, in Asia and Africa, we will get caught into another situation not of our making.”

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