By TON Sri Lanka

On Wednesday, IMF delegation visited for the second after Sri Lanka struggles to get the $3bn to steer out of the crisis. A team from the International Monetary Fund (IMF) will met Sri Lanka’s president for talks to finalize a bailout package, including rearrangement debt of about $29bn, during the nation’s worst financial crisis in more than 7 decades.

The second such IMF visit in three months comes on Wednesday as the Indian Ocean Island scrambles to lock in a staff-level pact with the global lender for a possible $3bn programme to pave its way out of the crisis. The IMF team will met with the president and a finance ministry delegation The team will also held talks with the central bank governor and other officials, including representatives of Sri Lanka’s financial and legal advisers Lazard’s and Clifford Chance.

The main point of the talks was how to find a supportable method for Sri Lanka’s awkward debt, which stood at 114 percent of gross domestic product (GDP) at the end of last year, to settle a staff-level agreement in September. Sri Lanka has $9.6bn in mutual debt and its private credit, which includes international sovereign bonds, stands at $19.8bn, finance ministry data show.

Japan and China are the largest holders of bilateral debt to Sri Lanka, with the latter accounting for about $3.5bn. Overall, when commercial debt is added, China holds about a fifth of Sri Lanka’s debt portfolio. There was an issue that how to include Chinese and domestic debt in the talks. As it is considered that China is a part of the problem, and needs to be part of the solution this time also.

For months the population of 22 million has struggled with rising inflation, economic reduction and a severe scarcity of needed items of food, fuel and medicine caused by a record fall in foreign reserves. The country’s most severe financial crisis since independence from Britain in 1948 stemmed from the combined effects of the COVID-19 pandemic and economic mismanagement, stoking unprecedented protests.

In July, the then-president fled the country and resigned after a mass uprising triggered by what many Sri Lankans saw as his mishandling of the financial crisis. The current President who is also the finance minister, plans to ask Japan to lead talks on bilateral debt restructuring after Sri Lanka secures IMF support. IMF said it needs assurances from Sri Lanka’s creditors. The country’s debt burden is considered unmaintainable leading the lender to seek assurances from creditors

The International Monetary Fund (IMF) has said it will need “adequate guarantees” from Sri Lanka’s creditors for a new program. The goal of the visit was to make headway on a staff-level agreement for an aid package to help the island nation weather a severe economic crisis.

Because Sri Lanka’s public debt is assessed as unsustainable, approval by the IMF Executive Board of the Extended Fund Facility program would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored. Last week that Sri Lanka asked Japan to invite the Indian Ocean Island’s main creditor nations, including China to talks on bilateral debt restructuring.

The loan package is being negotiated with the IMF is for between $2bn and $3bn .The President wants to present an interim budget in September concentrating on fiscal consolidation measures decided with the IMF. The country of 22 million people is facing its most grave financial crisis since independence from Britain in 1948, resulting from the combined result of the COVID-19 pandemic and economic mismanagement.

Sri Lankans have been battling shortages for months amid crippling inflation and a devalued currency, stoking unprecedented mass protests. In early July, thousands of people attacked the colonial-era presidential residence in Colombo which forced the former president to flee.