China has sent assurances backing IMF package, Ranil tells Parliament
- March 8, 2023
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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China has sent assurances backing IMF package, Ranil tells Parliament
Subject : International Relations
Section: International Organization
Concept :
- China has given assurances that it will support Sri Lanka’s debt restructuring, clearing the biggest hurdle for the debt-ridden country to secure a much-needed USD 2.9-billion bailout package from the IMF, President Ranil Wickremesinghe said on Tuesday.
- In January, India strongly backed the island nation’s efforts to secure a loan from the global lender to recover from its worst-ever economic crisis.
Background
- Sri Lanka is facing its worst economic crisis since independence from Britain in 1948, and policymakers have been grappling with multiple challenges over the past year including a shortage of dollars, runaway inflation and a steep recession.
- China, Japan, and India are Sri Lanka’s three largest bilateral lenders.
- Sri Lanka owes India around $1 billion that will come under the debt restructuring plan.
- New Delhi also separately provided Sri Lanka with about $4 billion in rapid assistance between January and July last year, including credit lines, a currency swap arrangement and deferred import payments.
Need of The Assurances:
- New Delhi’s backing comes at a critical time for Sri Lanka as it has to put its massively indebted public finances in order to unlock a $2.9 billion IMF loan that was agreed in September.
- Sri Lanka has to secure prior financing assurances from creditors, put its heavy debt burden on a sustainable path and increase public revenue before the global lender will disburse the funds.
- The IMF has stressed the importance of joint talks involving three of Sri Lanka’s main bilateral creditors – China, Japan and India.