Sri Lanka, IMF Talks: No Agreement Alterations Yet, But Tax Burden Revisions Planned

COLOMBO (News 1st); Sri Lanka's Cabinet Spokesperson, has confirmed that the Sri Lankan government currently has no plans to alter the agreement signed with the International Monetary Fund (IMF). 

Addressing speculations, Minister Herath clarified that any alterations to the agreement would necessitate renegotiations with the IMF.

"We have not altered the agreement signed with the IMF. We cannot do it alone. If we are to revisit the agreement, we will have to renegotiate with the IMF," stated Minister Herath.

He further elaborated on the ongoing discussions with the IMF, highlighting that significant progress has been made, particularly concerning the restructuring of International Sovereign Bonds (ISBs). 

"We are currently in talks with the IMF and have reached some agreement with them, with respect to the International Sovereign Bondholders. The ISB restructuring agreement will reach the final stages when we meet later this month, at the IMF head office," he noted.

Looking ahead, Minister Herath indicated the government's intention to address certain elements of the agreement that have placed a tax burden on the populace.

"In the future, we plan to amend some of the elements that have imposed a tax burden on the people. However, at the moment, we have not reached any such position," he added.

The upcoming meeting at the IMF head office is expected to be a critical juncture in finalizing the ISB restructuring agreement.

On the 4th of October, Sri Lanka said that consultation process with the country's Official Creditor Committee and the International Monetary Fund was successfully completed.

"The Democratic Socialist Republic of Sri Lanka is pleased to announce that, following the Agreement in Principle (AIP) reached with representatives of its international and local holders of International Sovereign Bonds (ISBs) on 19th September 2024, the Sri Lankan authorities have now completed their consultations with Sri Lanka’s Official Creditor Committee (OCC) and the IMF regarding the compliance of the AIP terms with the Comparability of Treatment (CoT) principle and the parameters of Sri Lanka’s IMF- supported program," said the country's finance ministry in a statement on Friday (4) night.

The Finance Ministry added that formal confirmation has been received from the OCC that the terms of the AIP as it stands are compatible with the CoT principle.

Concomitantly, the authorities have also received confirmation from the IMF staff that the AIP terms meet Program parameters under the EFF arrangement second review macro framework, when considered in conjunction with the restructuring of official claims in line with the terms agreed with the OCC and China Exim Bank in June 2024.

"Following the Presidential elections held in Sri Lanka on Saturday 21st September and the appointment of the new Government on 25th September, the Sri Lankan authorities confirm their endorsement of the Program debt targets and the AIP terms as announced on 19 September and confirm their intention to expedite the implementation of the ISBs' restructuring transaction in line with these terms," said the statement.

Sri Lanka thanks all its creditors as well as the IMF and the OCC for their good faith engagement and continued support throughout this process, it added.