Sri Lanka says it has reached an agreement with China's EXIM Bank on debt, clearing IMF funding snag

abcnews.go.com:

Sri Lanka says that it has reached an agreement on key terms and principles on its debt restructuring with the Exim Bank of China

COLOMBO, Sri Lanka — Sri Lanka says it has reached an agreement with the Exim Bank of China on key terms and principles for restructuring its debt, a key step toward unlocking a second instalment of a $2.9 billion package from International Monetary Fund aimed at rescuing the island nation from a dire economic crisis.

The finance ministry said in a statement issued Wednesday that the agreement covers $4.2 billion in outstanding debt and is an important step toward Sri Lanka's economic recovery.

The statement said the deal provides the necessary fiscal space for Sri Lanka to implement its economic reform agenda.

“The Sri Lankan authorities hope that this landmark achievement will provide an anchor to their ongoing engagement with the official creditor committee and commercial creditors, including the bondholders,” it said.

Authorities hope this will anchor their debt restructuring program and facilitate approval of the next tranche of IMF financing of about US$334 million.

An IMF team reviewing Sri Lanka's reform program delayed releasing a second tranche of IMF financing last month, saying it lacked oversight on whether adequate progress was being made on debt restructuring.

The economy is recovering but its foreign reserves have not been restored quickly enough due to lower-than-projected gains in tax collections, the review found. IMF officials said the government needs to improve its tax administration, eliminate exemptions and crack down on tax evasion.

Sri Lanka declared bankruptcy in April 2022 with more than $83 billion in debt — more than half of it to foreign creditors. Its economy