The United States has welcomed the in-principle agreement reached between Sri Lanka and the Official Creditor Committee (OCC) on specific financing terms to restructure the island nation’s debt in line with the parameters set in the International Monetary Fund (IMF) program.

Taking to X (formerly Twitter), the US Ambassador in Colombo, Julie Chung said this agreement supports a viable path to economic stability for Sri Lanka.

Chung emphasized that the agreement on debt restructuring and sound economic policies are crucial for the timely release of the next tranche of the IMF’s bailout package, which she said would provide the much-needed financial support for continued economic stabilization, recovery, and the improvement of public services, benefiting the people of Sri Lanka.

The ambassador reiterated that the United States stands by Sri Lanka for a sustainable recovery.

Pleased to see Sri Lanka’s agreement on a debt treatment with the Official Creditors Committee, supporting a viable path to economic stability for Sri Lanka. Agreement on debt restructuring & sound economic policies are crucial for the timely release of the next IMF tranche,…

— Ambassador Julie Chung (@USAmbSL) November 29, 2023

On Wednesday (Nov.29), both the OCC and the Sri Lankan government confirmed the in-principle agreement the two sides have reached for debt treatment.

In its statement, the OCC has commended the Sri Lankan authorities for their continuous efforts in implementing the reforms necessary for their country’s return to a sustainable path.

Following the launch of a common platform in April 2023 for talks among bilateral creditors to coordinate restructuring of Sri Lanka’s debt, the OCC was formally formed on May 09 with 17 countries to respond to the Sri Lankan authorities’ request for a debt treatment. It is co-chaired by India, Japan and France (as the chair of the Paris Club). Since its formation, the OCC has engaged extensively with the Sri Lankan authorities, the IMF, the World Bank as well as China, and Sri Lanka’s private creditors.

Meanwhile, Sri Lanka’s Finance Ministry revealed that the agreement covers approximately USD 5.9 billion of outstanding debt and consists of a mix of long-term maturity extension and reduction in interest rates.

The IMF on Thursday (Nov.30) said the agreement will pave the way for its Executive Board to consider clearing the first review of the four-year Extended Fund Facility (EFF) arrangement in December and unlock the next tranche of the loan which amounts to about USD 334 million in funds.

“We look forward to the Executive Board taking up this review by mid-December and the continuation of our productive collaboration with Sri Lanka in the period ahead,” Peter Breuer, IMF’s mission chief for Sri Lanka, said in a statement.

The debt deal between the OCC and Sri Lanka comes about a month after the island nation’s agreement with China’s Export-Import (Exim) Bank covering approximately USD 4.2 billion of outstanding debt,

Sri Lanka plunged into its worst financial crisis in seven decades last year after its foreign exchange reserves dwindled to record lows.

But since locking down the IMF bailout of $2.9 billion in March, the South Asian island nation has managed to partly stabilize its economy, bring down runaway inflation and rebuild currency reserves.

After receiving the IMF money, Sri Lanka stands to receive further funding from the Asian Development Bank (ADB) and the World Bank, bringing the total amount to around USD 900 million.