Japan to support Sri Lanka’s debt restructuring negotiations

Japan to support Sri Lanka's debt restructuring negotiations

COLOMBO: Japan, one of Sri Lanka’s main creditors, will back the South Asian nation as it seeks to restructure about US$30 billion of its foreign debt and find a way out of a crippling economic crisis, Tokyo’s envoy to the country said on Friday (Sep 23).

Reaching an agreement with creditors is key to Sri Lanka securing a US$2.9 billion bailout package from the International Monetary Fund (IMF).

“Japan stands by Sri Lanka in support of the debt restructuring negotiation process so that Sri Lanka can reach the final agreement with the IMF,” Ambassador Hideaki Mizukoshi said in an interview.

Japan holds around US$3.5 billion of Sri Lanka’s total bilateral debt of about US$10 billion, amounting to 4.4 per cent of the island’s GDP, according to government and IMF data.

Japan is also a major trading partner.

“Japan intends to play a constructive role with other creditor countries, including China and India,” Mizukoshi said.

Sri Lanka is facing its worst economic crisis in decades, with severely depleted foreign exchanges reserves leading to prolonged shortages of essentials, including fuel and food.

The financial turmoil is the result of economic mismanagement and the impact of the COVID-19 pandemic that upended Sri Lanka’s lucrative tourism industry.