Japan urges Sri Lanka to speed up debt restructuring ahead of IMF review

Japan Sri Lanka flags

Japan, Sri Lanka’s largest bilateral lender after China, emphasized yesterday (June 5) the need for Sri Lanka to expedite its debt restructuring efforts for its own benefit.

Japan’s Deputy Head of Mission, Kotaro Katsuki, noted that Sri Lanka’s progress in debt restructuring is behind schedule, and with an upcoming International Monetary Fund (IMF) review, it’s essential to gain momentum.

Katsuki stressed the importance of concluding the process promptly for the benefit of the national economy. “This is absolutely crucial for the Sri Lankan economy but also for the people who are doing business and investing in this country,” he said at a forum hosted by the Sri Lanka-Japan Business Council.

A memorandum of understanding is currently in progress, having gone through several revisions. “So, basically, the issue has nailed down to just one but in any case, there are some technical issues that hopefully we can solve soon,” Katsuki shared.

While multilateral lenders await the end of the debt restructuring to resume lending, Japan expressed its willingness to assist Sri Lanka before the process is finalized.

Last month, Sri Lanka and Japan agreed to restart stalled bilateral projects, including the US $1.5 billion Light Rail Transit. Katsuki described Japan’s move as a “bold move” and hoped it would boost confidence in Sri Lanka’s economic situation.

With the resumption of JICA loan projects, including the Bandaranaike International Airport upgrade, there will be tangible progress.

“There will be real work on the ground with the construction happening. So, it will be a means for us to contribute to the real economy, which I think at this moment is very crucial because the macroeconomic situation has improved significantly. But I think the ground reality still is a challenge,” Katsuki said.