Sri Lanka, Japan sign debt restructuring agreement

Cash-strapped Sri Lanka on Friday signed a debt restructuring agreement with Japan as part of its efforts to combat the ongoing economic crisis.

Debts amounting to a total of 369,453,720,000 yen (approx USD 2.50 billion) will be paid by Sri Lanka in semi-annual instalments between January 5, 2028 and July 5, 2042, according to a Japanese foreign ministry release.

The accrued interest from January 1, 2023 to December 31, 2023 will be paid on July 5, 2025; interest accruing on or after January 1, 2024 will be paid from July 5, 2025 to July 5, 2042, it said.

“The signing and exchange of the Notes is the first conclusion of the bilateral agreement on debt restructuring between a member country of the Official Creditor Committee (OCC) and Sri Lanka after the signing of the Memorandum of Understanding which identifies the details of conditions for debt restructuring among all the OCC member countries and Sri Lanka in July 2024.

“Following the announcement made by Sri Lanka in April 2022 regarding its temporary suspension of external debt payments, Japan, together with India and France as co-chairs, established the OCC and strongly supported Sri Lanka's efforts toward debt restructuring,” the release said.

Japan has stressed that the development of Sri Lanka, located at a strategic point in the Indian Ocean, is essential for the stability and prosperity of the entire Indo-Pacific region. Japan intends to further contribute to the sustainable development of Sri Lanka.

Observers opine that Japan has played a crucial role in Sri Lanka’s economic recovery, offering concessional financing and development assistance over the years. The completion of this restructuring deal is expected to enhance investor confidence and facilitate further financial support from international partners.