Sri Lanka’s authorities have confirmed their endorsement of the targets set under the IMF program and are committed to implementing debt restructuring agreements with internatio
SL Reaffirms Commitment to IMF Program Amid Presidential Transition
This development, announced by the Ministry of Finance, comes in the wake of the presidential election on September 21,
Fitch Ratings notes that Dissanayake's election initially raised concerns about policy stability and potential challenges to the IMF program. However, the recent consultations with the IMF and Sri Lanka’s Official Credit Committee, concluded on October 4, indicate that the new administration will likely adhere to previously established agreements, minimizing risks to the debt treatment process.
The Ministry of Finance stated that the consultations reinforced the principle of comparability in treatment between official creditors and bondholders, aligning with the terms of the IMF program. This development is viewed positively for the restructuring process.
Fitch has rated Sri Lanka's Long-Term Foreign-Currency Issuer Default Rating (IDR) as 'RD' (Restricted Default) since May 2022, reflecting the government's current non-payment status on foreign-currency debt. A potential upgrade from this rating hinges on the successful completion of commercial debt restructuring, which is expected to restore normal relations with the international financial community.
Despite ongoing efforts, Fitch anticipates that Sri Lanka's government debt will remain elevated. The IMF projects that the gross general government debt-to-GDP ratio will decline gradually from approximately 116% in 2022 to around 103% by 2028, even following the planned restructuring.
As Sri Lanka navigates this critical juncture, the commitment to the IMF program remains a cornerstone of its strategy to stabilize the economy and restore fiscal health.
