Japan Insists Sri Lanka Should Sign MoUs Early For Debt Restructuring

Japan Insists Sri Lanka Should Sign MoUs Early For Debt Restructuring

Japan is leading the international discussions on Sri Lanka's debt restructuring as co-chair of the Official Creditors' Committee after the island nation, in April 2022, declared its first-ever sovereign default since gaining independence from Britain in 1948.

PTIUpdated: Saturday, May 04, 2024, 07:34 PM IST
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Japan Insists Sri Lanka Should Sign MoUs Early For Debt Restructuring | File/ Representational Pic

Japan on Saturday said it expected cash-strapped Sri Lanka to sign early MoUs with the official creditors to reach a "transparent and comparable" debt restructuring agreement with all the creditors as Colombo said it expects the debt restructuring process to conclude in time for the next tranche of the IMF process.

Japan's Role in Debt Restructuring

Japan is leading the international discussions on Sri Lanka's debt restructuring as co-chair of the Official Creditors' Committee after the island nation, in April 2022, declared its first-ever sovereign default since gaining independence from Britain in 1948. The unprecedented financial crisis led President Ranil Wickremesinghe's predecessor Gotabaya Rajapaksa to quit office in 2022.

IMF Assistance and Financial Support

In March, the International Monetary Fund (IMF) said it has reached a staff-level agreement with Sri Lanka for the next phase that would enable it access to USD 337 million from the nearly USD 3 billion bailout approved in 2023 for the country.

Two tranches of USD 330 million each were released in March and December 2023 even as the global lender has praised Colombo for its macroeconomic policy reforms, which it said, "are starting to bear fruit." On Saturday, according to news portal NewsFirst.lk, visiting Japan's Minister of Foreign Affairs Yoko Kamikawa while conveying her country's expectation for the early signing of the MOU between the official creditors committee and Sri Lanka said, "This stressed the importance of reaching a debt restructuring agreement with all the creditors in a transparent and comparable manner." "The restoration of stability and economic development of Sri Lanka, which is at the strategic location in the Indian Ocean, is essential for the stability and prosperity of the entire Indo-Pacific region. Japan, as a friend, continues to support Sri Lanka. This is exactly what I came to Sri Lanka today to convey," Kamikawa told a media briefing alongside her Sri Lankan counterpart, Ali Sabry here.

Japan's Support for Sri Lanka's Economic Development

Further, conveying Japan's intention to further support Sri Lanka's development by swiftly resuming existing yen loan projects, Kamikawa said, "Once the MOU on debt restructuring is signed and Sri Lanka's government's intention to swiftly conclude it, a bilateral agreement is confirmed." "I also express Japan's intention to continue to supply Sri Lanka's ongoing effort for national reconciliation," she was quoted by the news portal as saying. She also said that Japan intends to further strengthen cooperation with Sri Lanka in the maritime domain to realise "a free and open Indo-Pacific." "In this regard, based on the request from Sri Lanka, I have conveyed to Minister Sabry that Japan will offer a vessel equipped with a sonar to be used for compiling maritime data and charts," she said.

Another news portal, Adaderana.lk quoted Sri Lankan Minister of Foreign Affairs Sabry saying: "I have highlighted that Sri Lanka has worked diligently to stabilise the economy, enhance debt sustainability and implement growth-oriented structural reforms. As of today, the country has not only recovered from an economic collapse but has experienced a rapid revival, showcasing the resilience and determination of the Sri Lankan people." "We expect the conclusion of the debt restructuring process in time for the next tranche of the IMF process," the Sri Lankan minister said.

Inviting Japanese Investments

Meanwhile, the portal also said that Sabry also invited Japan, as a trusted partner of Sri Lanka, to resume the Japanese investment projects which are currently in the pipeline and invited fresh investments from Japan in several sectors.

He suggested that Japan could invest in areas such as power, infrastructure including port and highways sectors, dedicated investment zones as well as in green and digital economy by Japan's Official Development Assistance (ODA) extended through the Japan International Cooperation Agency (JICA). 

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