The International Monetary Fund (IMF) has expressed its intention to scrutinize the specifics of the recent debt treatment agreement between Sri Lankan authorities and the Export-Import Bank (Exim Bank) of China. This development is a significant step towards restoring the island nation's long-term debt sustainability and fostering economic recovery.

Senior IMF Mission Chief for Sri Lanka, Peter Breuer, shared these insights during a media briefing on Friday (October 20). The IMF has taken note of the tentative agreement, which was made public on October 11 when the Finance Ministry disclosed that Sri Lanka and the China Exim Bank reached "an agreement on the key principles and indicative terms of a debt treatment."

The debt agreement in principle encapsulates around USD 4.2 billion of outstanding debt, and Sri Lankan authorities believe it will provide essential fiscal space for the nation to execute its ambitious reform agenda.

Mr. Breuer also commended Sri Lankan authorities for their prompt publication of the 'Governance Diagnostic Report'. It's worth noting that Sri Lanka is the first country in Asia to undergo the IMF Governance Diagnostic exercise.

Although the country's economy exhibits "tentative signs of stabilization," growth momentum remains subdued, and full economic recovery is not yet guaranteed, according to Mr. Breuer. However, on Thursday, October 19, the IMF team, in collaboration with Sri Lankan authorities, reached a staff-level agreement on economic policies, concluding the first review of the 48-month Extended Fund Facility (EFF)-supported program. Following this agreement's approval by IMF Management and the IMF Executive Board, Sri Lanka will gain access to SDR 254 million, approximately USD 330 million, in financing.

The IMF team has encouraged Sri Lankan authorities to implement key recommendations from the recently published Governance Diagnostic Report. They stressed that taking concrete steps to address corruption risks and strengthen accountability is vital for rebuilding economic confidence and achieving a more robust and inclusive economic growth.