Colombo, Jul 29 (EFE).- Technical discussions between the Sri Lankan authorities and the International Monetary Fund (IMF) have resumed with the aim of reaching an agreement for a financial bailout for the crisis-hit island, official sources said Friday.
The discussions seek to finalize the few remaining policy matters that need to be agreed upon prior to reaching a Staff Level Agreement (SLA), Sri Lanka’s Ministry of Finance said in a press release.
According to the Ministry of Finance, reaching an SLA was delayed due to the social unrest and political instability that has plagued the nation since May this year.
Mass protests in Sri Lanka led to the resignation of former president Gotabaya Rajapaksa, Prime Minister Mahinda Rajapaksa, and other cabinet ministers.
A new government was formed under the leadership of President Ranil Wickremesinghe, allowing for the resumption of the negotiations.
“A Staff Level Agreement would be an important milestone towards IMF Board approval for the EFF (Extended Financing Facility) programme, which in turn would help unlock bridging finance to support much-needed external financing for Sri Lanka,” the statement added.
The Sri Lankan government is seeking an EFF as the country struggles to make essential imports.
The delay in reaching a settlement has affected the day-to-day lives of Sri Lankans with schools opening for only three days a week in most parts of the country, and most state sector workers working from home due to the limitations in fuel supply.
The Ministry of Finance stated that authorities were also working with debt restructuring advisers Lazard and Clifford Chance to reach a “consensus on debt restructuring arrangement with creditors.”
“The government is committed to engaging its creditors in good faith with a view to reaching a comprehensive debt restructuring program that provides a fair and sustainable outcome for all stakeholders,” the ministry further added.
Sri Lanka is facing the worst economic crisis since its independence from the British Empire in 1948, caused in part by heavy debt, flawed government policies, and the impact of the Easter attacks and the pandemic on tourism.
Sri Lanka’s foreign exchange reserves are now completely depleted, leaving the country without enough money to purchase fuel and gas. Energy shortages have forced strict daily electricity rationing.
The crisis-hit island is now on a challenging road of austerity and put a sustainable policy framework in place. EFE