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Paris Club to give Lanka financing assurances

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LONDON: The Paris Club of creditor nations is ready to provide financing assurances to Sri Lanka, a key step needed to unlock a $2.9 billion bailout by the International Monetary Fund (IMF), two sources with direct knowledge of the matter said.

The informal group of bilateral lenders is set to announce its support to the crisis-hit nation on a debt overhaul "soon", said one of the sources, who asked not to be named because the talks are private.

The Asian island nation, which is grappling with soaring inflation, a recession and currency depreciation, entered into a staff level agreement with the IMF last September. But it needs financing assurances from key bilateral lenders before the fund's executive board approves the programme.

Sri Lanka's public debt stood at 122 per cent of GDP, of which 60 per cent is denominated in foreign currency, according to data in a country presentation to investors in November. China and India, both non-Paris Club members, are among the country's top bilateral lenders. "Paris Club assurance is not reliant on China," the source said.

Another source said the informal group is currently reaching out to other non-Paris Club members, besides China, on financing assurances, but did not provide any further details.

India previously committed to help ease the debt burden of neighbour Sri Lanka as part of the IMF programme, and China's EximBank offered a two-year moratorium in a letter sent in January.

The IMF's research director, Pierre-Olivier Gournichas, described the debt relief provided by India as a "good development" because it's "consistent with helping the country restore its debt sustainability". - Reuters

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