Sri Lanka's State Finance Minister Shehan Semasinghe emphasized the necessity for access to lower-cost loans for middle-income countries during the IMF/World Bank Spring Meeting. Semasinghe highlighted the challenges faced by emerging and frontier market economies in maintaining debt sustainability and financing long-term development and sustainability needs.
He welcomed the reforms being considered by the IMF regarding its Lending Into Official Arrears policy, aimed at addressing some of these challenges. Semasinghe stressed that the constrained global financial environment has made it increasingly difficult for vulnerable middle-income countries to secure low-cost and long-term financing for development and climate change initiatives.
Semasinghe proposed the need for enhanced access to concessional financing, even for middle-income countries that are typically not eligible for such funds. Sri Lanka, grappling with an ongoing debt restructuring process and seeking support for its recovery from an unprecedented economic crisis, has been exploring avenues for financial assistance from multilateral financial institutions like the IMF and World Bank.
Since declaring bankruptcy in April 2022 with a sovereign debt default, Sri Lanka has refrained from repaying external loans. The country has been exploring alternative sources of funding, including nature-linked financial instruments like green bonds.
Semasinghe also highlighted Sri Lanka's initiatives in addressing climate change, including the launch of the Tropical Belt Initiative at COP28 in Dubai. This initiative aims to catalyze private financing into climate and biodiversity-related investments. Additionally, Sri Lanka has taken the lead in establishing a Climate Change University to generate knowledge and expertise in addressing the challenges related to climate change and biodiversity loss.
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