Sri Lanka is on the cusp of a significant breakthrough as it nears a crucial staff-level agreement with the International Monetary Fund (IMF) for much-needed financial support. State Minister of Finance, Shehan Semasinghe, revealed that discussions are well underway, with a staff-level agreement expected in the near future.

According to Semasinghe, the ongoing negotiations primarily focus on revenue and other vital clarifications. "We are confident of reaching a staff level agreement soon," he remarked in an interview with Bloomberg.

This impending agreement is set to unlock another tranche of a $3 billion funding package from the IMF, providing a lifeline for Sri Lanka's economic recovery following a default last year. The nation has been diligently working to establish terms for the restructuring of its debt to various international entities, including China, India, the Paris Club, and foreign bondholders. The aim is to reduce the country's indebtedness to levels acceptable to the IMF.

Sri Lanka has made significant progress in dealing with its domestic debt restructuring and has reached tentative terms with the China Exim Bank. Now, the focus shifts to the progress made in discussions with other official creditors and foreign bondholders. Recently, the bondholders submitted a proposal, which included a 20% haircut and the introduction of "macro-linked bonds."

In response to the bondholders' proposal, Shehan Semasinghe confirmed that Sri Lanka's adviser, Lazard, would evaluate its comparability. Discussions with China continue to be a priority, with a commitment to transparency and comparability. Negotiations with the official creditor committee are also ongoing, indicating a concerted effort to navigate the complexities of Sri Lanka's debt restructuring process.