Sri Lanka, Japan agree to resume stalled projects including light rail

Japan Sri Lanka flags

Reuters says Sri Lanka and Japan have agreed to collaborate on reviving stalled bilateral projects, including a $1.5 billion Japanese-funded light railway.

This agreement was announced during Japanese Foreign Minister Yoko Kamikawa’s visit to Sri Lanka on Saturday (May 4).

Sri Lanka, grappling with restructuring its foreign debt following a severe financial crisis in 2022, is eyeing a $2.9 billion IMF bailout.

Kamikawa expressed Japan’s anticipation for the prompt signing of a Memorandum of Understanding (MoU) between Sri Lanka and the official creditor committee, co-chaired by Japan, aimed at aiding in the restructuring of Sri Lanka’s bilateral debt.

“I also conveyed Japan’s intention to further support Sri Lanka’s development by swiftly resuming yen loan projects once the MoU on debt restructuring is signed and the Sri Lanka government’s intention to swiftly conclude a bilateral agreement is confirmed,” Kamikawa told reporters in Colombo.

Sri Lanka withdrew from the rail project in 2020 amid shifting alliances towards China under the former president.

However, the Sri Lankan cabinet has recently approved President Ranil Wickremesinghe to determine the appropriate timeline to reactivate projects with Japan.

With approximately $2.7 billion in outstanding loans, Japan stands as Sri Lanka’s largest bilateral lender after China, with India following as the third significant creditor.

Sri Lanka’s Foreign Minister Ali Sabry expressed confidence in finalizing necessary agreements in time for the upcoming IMF review.