IMF mulls loan approval to Sri Lanka, even without China’s assurance

The International Monetary Fund (IMF) is considering approving a loan for Sri Lanka, even without China’s assurance of debt-restructuring support, Bloomberg News and Reuters reported.

Under a rarely used policy, the global lender may consider approving the island nation’s loan, as the only prerequisite hindering the go-ahead is China’s formal assurance, Bloomberg reported, citing people familiar with the matter.

“The Sri Lankan authorities continue to seek from their official bilateral creditors financing assurances so that the Fund’s Executive Board can consider their request for an IMF arrangement,” an IMF spokesperson said in a statement to Reuters.

The lender said it was premature to discuss the precise IMF policy modalities that could be applied, adding that IMF staff continue to engage with Sri Lankan authorities on completing upfront policy measures.

Sri Lanka has been fighting its worst economic crisis since gaining independence from Britain in 1948, amidst a shortage of dollars, surging prices and a lack of essential items, such as fuel and medicine. It has defaulted on loans and been forced to seek a bailout from the IMF.

The news the IMF may consider extending aid without assurances from China comes ahead of US Treasury Secretary Janet Yellen’s visit to India next week for G20 finance meetings, where the US is reportedly going to focus on unblocking debt restructuring for distressed countries.

Earlier in February, the IMF said Sri Lanka’s $2.9 billion bailout package was set to be approved as soon as the country obtained adequate assurances from bilateral creditors and met remaining requirements.