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Japan seeks Sri Lanka economic recovery for regional stability

By: Staff Writer

May 05, Colombo (LNW): Strategically placed Sri Lanka’s economic recovery is essential for stability in the Indo-Pacific region, Japanese Foreign Minister Yoko Kamikawa said Saturday, urging Colombo to swiftly restructure its foreign debt.

After talks with her Sri Lankan counterpart, Ali Sabry, Kamikawa said that Colombo should secure agreements with bilateral lenders and international sovereign bondholders to unlock suspended foreign funding.

The Sri Lankan government which defaulted on its $46 billion external debt in April 2022, had hoped to finalize deals with foreign creditors by April but there have been no final agreements yet although talks will be continued in Colombo to arrive at a  consensus by June this year.

Kamikawa said she “stressed the importance of reaching a debt restructuring agreement with all the creditors,” including China — the largest bilateral lender to the island.

She said Tokyo considered Colombo’s economic recovery to be crucial for the entire region. The island is located halfway along the main east-west international shipping route.

“The restoration of stability and economic development of Sri Lanka, which is at a strategic location in the India Ocean, is essential for the stability and prosperity of the entire Indo-Pacific region,” she added.

Sri Lanka must secure agreement from all official creditors and a majority of private bondholders to continue with a four-year, $2.9 billion bailout loan that began in March last year.

Japan, the second largest bilateral lender to the island, has expressed concern about China’s big infrastructure projects in Sri Lanka and elsewhere in the region.

The Japanese Minister of Foreign Affairs Yoko Kamikawa conveyed Japan’s intention to further support Sri Lanka’s development by swiftly resuming existing ‘Yen loan projects’ once the Memorandum of Understanding (MOU) on debt restructuring is signed and the Sri Lankan government’s intention to swiftly conclude bilateral agreement is confirmed.

Ms. Kamikawa expressed Japan’s intention to continue to support Sri Lanka’s ongoing efforts for national reconciliation.

Meanwhile, she mentioned that various reforms that Sri Lanka is currently undertaking are all essential for the normalization of Sri Lanka’s economy.

Also Saturday, the two countries agreed to work to resume stalled bilateral projects, including a $1.5 billion Japanese-funded light railway. Sri Lanka pulled out of the rail project in 2020, when it was moving closer to China under Rajapaksa.

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