The International Monetary Fund reported constructive talks with Sri Lankan authorities on Thursday, raising hopes it could soon grant preliminary approval for a credit facility to alleviate a crisis in which the country is struggling to pay for imports.
"The discussions will continue virtually with a view to reaching a staff-level agreement on the EFF arrangement in the near term," IMF said, referring to the credit arrangement, called an extended fund facility.
Sovereign dollar bonds issued by Sri Lanka slipped as much as 1.8 cents after the International Monetary Fund statement. The 2025 bond took the biggest tumble and hit a fresh record low at just over 34 cents in the dollar, Tradeweb data showed.The financial crisis is the worst in decades for the island of 22 million people, which has defaulted on some foreign debt.
The IMF said the high fiscal deficit had to be reduced while ensuring adequate protection for the poor and vulnerable. Since revenue was weak, far-reaching tax reforms were urgently needed to achieve these objectives.
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