The discussions between the visiting delegation of the International Monetary Fund (IMF) and the Governor of Central Bank of Sri Lanka Dr. Nandalal Weerasinghe to finalize a bailout package, including restructuring debt of about USD 29 billion, amid the nation’s worst financial crisis in more than seven decades, kicked off this morning (Aug 24).

IMF’s Resident Representative for Sri Lanka, Tubagus Feridhanusetyawan and Finance Secretary Mahinda Siriwardana are also taking part in the talks taking place at the Central Bank premises.

Staff from the global lender will be in Colombo from August 24 to 31.

The goal of the visit is to make progress on a staff-level agreement for an aid package in the near term, to help the island nation weather a severe economic crisis, the IMF said on Friday.

Meanwhile, the IMF delegation is set to meet President Ranil Wickremesinghe later today, Reuters said citing an official of the presidential secretariat who spoke on the condition of anonymity.

The delegates are also expected to meet with the representatives of Sri Lanka’s financial and legal advisers Lazard’s and Clifford Chance.

The main sticking point of the talks is how to find a sustainable track for Sri Lanka’s unwieldy debt, which stood at 114% of GDP at the end of last year, so as to clinch a staff-level agreement in September.

Sri Lanka has USD 9.6 billion in bilateral debt and its private credit, which includes international sovereign bonds, stands at USD 19.8 billion, according to Finance Ministry data.

Japan and China are the largest holders of bilateral debt, with the latter accounting for about USD 3.5 billion. Overall, when commercial debt is added, China holds about a fifth of Sri Lanka’s debt portfolio.

Earlier this week, the Central Bank governor said the disbursement of IMF’s Extended Fund Facility to Sri Lanka can be expected by the end of the year, subject to the success of debt restructuring with creditors and successful negotiations with the IMF.

Meanwhile, the IMF said approval by its Executive Board of the Extended Fund Facility program would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored, as the island nation’s public debt is assessed as unsustainable.

-with inputs from agencies