Sri Lanka is on the verge of finalizing a debt treatment plan in collaboration with India and the Paris Club, according to sources cited by The Hindu.

The proposed plan is expected to include a moratorium of up to six years and a reduced interest rate during the repayment period.

The Colombo-based source, speaking to The Hindu, emphasized the negotiations have reached an advanced stage, and formal agreement terms are anticipated imminently.

As many as 17 countries that have extended loans to Sri Lanka formed the Committee last year for ease of debt restructuring negotiations.

Notably, China has chosen not to participate directly in the OCC platform but has been attending meetings as an observer.

Meanwhile, Colombo has consistently assured the OCC that it will engage in negotiations for the repayment of Chinese loans on terms comparable to those agreed upon with other creditors, reported The Hindu.

The International Monetary Fund (IMF) expressed cautious optimism about Sri Lanka's debt restructuring efforts, highlighting agreements reached with key creditors.

However, the IMF urged Sri Lankan authorities to expedite the finalization of these agreements for a swifter path towards debt sustainability.

"Sri Lanka’s Agreements in principle with the Official Creditor Committee and Export-Import Bank of China on debt treatments consistent with program parameters were important milestones putting Sri Lanka’s debt on the path towards sustainability," stated Peter Breuer, IMF Senior Mission Chief. "The critical next steps are to finalize the agreements with the official creditors and reach Agreements in Principle with the main external private creditors in line with program parameters in a timely manner. This should help restore Sri Lanka’s debt sustainability over the medium term."

Breuer clarified that delays in finalizing agreements with official creditors haven't been flagged as a concern. He acknowledged that converting agreements in principle into formal agreements can take time. However, he emphasized the importance of this process for solidifying debt relief efforts.

On Thursday, the IMF announced that the IMF staff and the Sri Lankan authorities have reached staff-level agreement on economic policies to conclude the second review of the 4-year EFF-supported program and the 2024 Article IV Consultation.

Once the review is approved by IMF Management and completed by the IMF Executive Board, Sri Lanka will have access to SDR 254 million (about US$337 million) in financing