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(PTI) IMF chief Kristalina Georgieva said yesterday (4) she was delighted that the Washington-based lender and the Sri Lankan government had reached a staff-level agreement to provide about $2.9 billion for help the bankrupt country, calling the deal “an important step forward”. .” The International Monetary Fund (IMF) announced on Thursday that it would provide Sri Lanka with a loan of around $2.9 billion over a four-year period to help the island nation overcome unprecedented economic turbulence. The bailout is expected to boost the country’s credit ratings and the confidence of international creditors and investors.

“Very pleased that IMF staff and Sri Lankan government officials have reached a staff-level agreement to support the country’s economic policies with a 48-month expanded financing facility of approximately $2.9 billion. “, said Georgieva in a tweet.

“This is an important step forward for Sri Lanka,” she added.

The new Expanded Financing Facility (EFF) will support Sri Lanka’s program to restore macroeconomic stability and debt sustainability, while preserving financial stability, reducing vulnerabilities to corruption and unlocking the growth potential of the economy. country, the IMF said.

The arrangement is subject to approval by IMF management and the Executive Board over the coming period, subject to implementation by the authorities of prior actions, obtaining assurances funding from Sri Lanka’s official creditors and a good faith effort to reach a collaborative agreement. agreement with private creditors, he said.

“Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be needed to help ensure debt sustainability and close financing gaps,” the statement said, amid fears that China does not accept Western creditors on debt restructuring on an equal footing.

All Sri Lankan creditors, including China, must agree to restructure their existing loans to the island nation before the IMF begins disbursing the $2.9 billion loan. The IMF has also called for measures to increase tax revenue by implementing tax reforms, introducing cost recovery – pricing based on fuel and electricity, increasing social spending to help the poor and vulnerable people in the current economic crisis, the restoration of a flexible exchange rate, a capitalized banking system and a stronger anti-corruption legal framework.

Meanwhile, Sri Lanka’s Central Bank Governor Nandalal Weerasinghe warned on Saturday that if IMF reforms, which are being implemented, are reversed, the country could be back to square one in three years.

“We are going to the IMF to ask for a loan for the next two years, promising that we will rectify our mistakes. But we can’t go back to our old ways of having spending exceed revenues, government lending concessions and state corporations making losses as soon as this period is over, we will have to go back to the IMF,” Weerasinghe said. . quoted as saying in the report.

“It happened 16 times. But fortunately, we never had to go to the IMF when we were faced with a debt crisis. We always went to the IMF before the crisis hit, but after getting help we started making the same old mistakes again,” he added.

The April debt moratorium led Sri Lanka to default on its external obligations, and an extremely low level of foreign exchange reserves hampered the import of essential goods, including fuel, further hampering economic activity.

The country’s economy is expected to contract by 8.7% in 2022 and inflation has recently topped 60%. The impact has been borne disproportionately by the poor and vulnerable, the IMF noted.

Sri Lanka, a country of 22 million people, plunged into a political crisis in July after former President Gotabaya Rajapaksa fled the country following a popular uprising against his government for mishandling the country. economy. Rajapaksa was replaced by his ally Ranil Wickremesinghe. The country is also expected to restructure its debt worth $29 billion, with Japan expected to coordinate with other creditor nations, including China on the issue.

In mid-April, Sri Lanka declared default on its international debt due to the forex crisis. The country owes $51 billion in foreign debt, of which $28 billion must be paid by 2027. There have been street protests in Sri Lanka against the government since early April over its mishandling of the economic crisis. A crippling shortage of foreign exchange reserves has led to long queues for fuel, cooking gas and other essentials, while power cuts and soaring food prices have deepened the misery of population.