Sri Lanka's major creditors officially launched a negotiation Thursday for restructuring the island's debt, an essential step to give the Indian Ocean nation some financial breathing room.
"I am very pleased to announce that an agreement has been reached between the creditors to discuss the restructuring and thus get Sri Lanka out of the unprecedented crisis it is going through," said Japanese Finance Minister Shunichi Suzuki at a press conference at International Monetary Fund (IMF) headquarters.
The negotiations will bring together the main creditor countries, starting with Japan and India, as well as the Paris Club creditors, which will be represented by France.
China, however, has not said whether it will participate.
"The beginning of a coordinated effort... to address Sri Lanka's distress means we have made a critical policy adjustment" with the IMF, said Sri Lanka's President Ranil Wickremesinghe, who is also finance minister, via video conference.
However, Sri Lanka "remains in a deep debt crisis," said IMF Deputy Managing Director Kenji Okamura, "and expeditious debt resolution is fast needed for Sri Lanka to emerge as quickly as possible from its crisis."
After months of talks, Sri Lanka's creditors agreed in early March to provide the assurances to the IMF to release a pending US$2.9 billion aid package.
But China was slow to join in, effectively blocking approval of the IMF program, which was finally agreed on March 20.
Beijing initially proposed a two-year moratorium on the repayment of its debts, but without accepting a reduction in the amount, an insufficient concession for the IMF.
The island of 22 million people defaulted on its $46 billion foreign debt in April 2022, during an unprecedented economic crisis that caused months of food and fuel shortages.
Just over $14 billion of the total foreign debt is bilateral debt to foreign governments, 52 percent of which is owed to China.
