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by Matthew Russell Lee, Patreon Substack

IMF, April 4 – Amid controversy in Sri Lanka about a reported connection between the scheduled election and debt restructuring programs, Inner City Press at the International Monetary Fund on April 4 asked Spokesperson Julie Kozack about restructuring, particularly by China state creditors.

  Ms. Kozack praised some developments in Sri Lanka, and described the staff level agreement. 

 Transcript on Sri Lanka:

Matthew Russell Lee, Inner City Press: "In Sri Lanka, there's some reporting that's kind of linking the election to the program.  I wanted to ask if you can sort of clarify that, and also if you have any update on the debt restructuring, including with China state creditors."

Julie Kozack: ". On December 12, 2023, the IMF's Executive Board approved the first review of Sri Lanka's program with the IMF.  It enabled a disbursement of US$337 million.  And on March 21, the IMF Staff and the Sri Lankan authorities reached a Staff-Level Agreement on economic policies to conclude the second review, as well as the 2024 Article IV Consultation.  Completion of the review by the Executive Board requires, first, the implementation of the prior actions that have been agreed and second, completion of what we call financing assurances review.  That review would need to confirm that multilateral partners are continuing their financing contributions to Sri Lanka, and it will also assess progress with debt restructuring, and it will need to conclude that adequate progress is being made. I would also add that macroeconomic policy reforms in Sri Lanka are starting to bear fruit. Commendable outcomes include rapid disinflation, robust reserve accumulation, and initial signs of economic growth, while preserving stability of the financial system.  Public finances have strengthened following substantial fiscal reforms, and it is critical that this reform momentum be continued. The next steps on the debt restructuring are to conclude the negotiations with external commercial creditors and to implement agreements in principle with official creditors.  The domestic debt operations, you know, part of the debt restructuring, are largely completed, and there is a strong expectation that agreements with commercial creditors consistent with program parameters will be reached by completion of the second review

  Back on March 7, a year after the failure of Silicon Valley Bank and Signature Bank, the International Monetary Fund has warned of more trouble, just as NYCB teeters. Inner City Press on March 7 asked the IMF about it, video here.  

 The IMF had said, "the high concentration of CRE [commercial real estate] exposures represents a serious risk to small and large banks amid economic uncertainty and higher interest rates, potentially declining property values, and asset quality deterioration.”

Small banks retain “exceptionally high CRE concentration for which losses could compromise their safety and soundness”, it added. Nearly 33% of US banks have commercial property loan books which are so big versus their capital buffers that they exceed regulatory guidance. So where are the regulators? 

 Inner City Press asked the IMF spokesperson, noting the Mnuchin investment in NYCB (and imposition of Joseph Otting as CEO).

IMF Spokesperson Julie Kozack replied that the risk is real and is being studied, with more to come in the GSFR. Watch this site.

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