An IMF team is arriving in Colombo this Wednesday to assess the total external and internal debt of bankrupt Sri Lanka before it takes a final decision on the country’s request for a loan. The team will be in Sri Lanka from August 24 to August 31, according to a report in The Hindustan Times.

It cited officials based in Washington as saying that only after the total debt of Sri Lanka is assessed, the creditor nations will be sought for assurances that debt sustainability will be restored. However, this political play will come later after the issue is discussed with multilateral lending institutions such as the World Bank. 

While the loan package sought by President Ranil Wickremesinghe is around USD 2 to 3 billion, the assistance is not likely to be disbursed immediately. The IMF is looking not only at the at the restructuring of Sri Lanka’s external debt but the huge domestic debt burden as well before it okays the loan.

The total external and internal debt of the Island Nation is around USD 97 billion, out of which more than USD 51 billion is owed to Japan, China, India, and the Asian Development Bank. 

The total debt of Sri Lanka works out to more than its GDP and its forex reserves have dwindled to USD 1.82 billion in July 2022, it will take a long time for Sri Lanka to come out of the current economic crisis as global tourist travel, Colombo’s main source of foreign exchange, continues to be impacted by the coronavirus pandemic. 

Sri Lanka’s economic problems have been  aggravated by serious mismanagement by the Rajapaksa regime by going in for economically unviable infrastructure projects financed through high interest loans from Chinese banks. As of now the country owes more than 10 percent of its external debt to China for being part of the Belt Road Initiative.