Sri Lanka has secured preliminary approval from the International Monetary Fund (IMF) for the next tranche of a $3 billion bailout program, as announced on Friday. This approval is contingent upon the IMF executive board's endorsement of a staff-level economic policy agreement. The IMF emphasized the importance of an agreement with official creditors for debt restructuring and addressing governance and corruption issues for sustained recovery.
The country's macroeconomic reforms are showing signs of improvement, with the economy beginning to stabilize. Progress in debt restructuring includes a local debt swap and a preliminary agreement with the Export-Import Bank of China. Despite Sri Lanka's unfavorable response, dollar bondholders submitted a restructuring proposal.
On Friday, it was revealed that following the first review of the 48-month Extended Fund Facility (EFF) program, Sri Lanka has secured IMF's approval for the release of the second tranche equating to SDR 254 million or USD 330 million from a total bailout package of USD 2.9 billion. The global lender-supported EFF program aims to back Sri Lanka's economic policies and reforms. However, the IMF mission in Sri Lanka warned that complete economic recovery isn't guaranteed despite initial stabilization signs.
The fund disbursement, which is crucial to Sri Lanka's cash-strapped economy, is subject to approval by IMF management and its executive board.
In other financial news from the island nation, notes due in 2030 remained steady while inflation fell to 1.3% from around 50% in March following measures to boost tax revenue after last year's debt default. Dollar bonds have surged over 60% this year due to fiscal recovery optimism. Strengthening foreign exchange reserves remains a key goal for the country.
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