Japan first among Sri Lanka’s OCC bilateral creditors to ink restructure agreements

• To restructure Sri Lanka’s bilateral external debt worth US $ 2.5bn
• Includes 11 ongoing projects along with second phase of BIA expansion project
• Japanese officials note debt restructuring alone won’t be sufficient to regain foreign investor confidence

By Nishel Fernando 
Japan yesterday became the first bilateral creditor among the Official Creditor Committee (OCC) to restructure Sri Lanka’s bilateral external debt worth US $ 2.5 billion and unlocking doors to new projects. 
The signing of the bilateral Amendment Agreement with the Japan International Cooperation Agency (JICA) and Exchange of Notes with the government of Japan, in relation to the External Debt Restructuring Process, concluded at the Finance Ministry in Colombo yesterday.
The Exchange of Notes was signed by Finance, Planning and Economic Development Ministry Secretary K.M. Mahinda Siriwardana and Ambassador of Japan to Sri Lanka Isomata Akio, on behalf of the government of Japan. A further bilateral Amendment Agreement was signed by Siriwardana and JICA Chief Representative Tetsuya Yamada.
Under the bilateral loans, there was about 354 billion yen (US $ 2.5 billion) worth of loans and 11 ongoing projects, including the second phase of the Bandaranaike International Airport (BIA) expansion project. 
“It is this spirit of cooperation that has enabled us to make meaningful progress towards restoring Sri Lanka.  At the same time, I need to acknowledge with deep gratitude the government of Japan’s decision to resume the disbursements soon after signing of the official memorandum of understanding on June 26, 2024. This time decision reflects the fact of confidence with Sri Lanka’s economic reform efforts and we focus on continuing to implement essential development projects and meet with our people,” Siriwardana remarked.
In terms of a timeframe on formalising debt restructuring agreements with bilateral creditors, he noted that it’s difficult to predict a timeframe in definite terms that all of it can be wrapped up in a month or two.
In this context, he highlighted this agreement as another prime example of Japanese government’s unavailing support to Sri Lanka.
Sharing his thoughts, Akio shared that the conclusion of external debt restructuring would enable Sri Lanka to regain the confidence of the investors.
However, the Japanese officials noted that debt restructuring alone won’t be sufficient to regain the foreign investor confidence.
Meanwhile, Yamada outlined that Japan can support again to embrace more and more opportunities to cooperate together towards full recovery and further accelerated growth of the economy of Sri Lanka.
Despite the current positive trajectory, Siriwardana stressed that the country should remain vigilant in becoming complacent.
“We appreciate the strong support and cooperation extended by our partners like Japan but there is no time to be complacent. The discipline economic reforms introduced in the recent past will be continued,” he said.
Commenting on bringing back the cancelled LRT projected, the Treasury officials noted that the government was yet to make such request from the Japanese counterparts.
“We look forward to further strengthening this relationship with Japan, ensuring that our cooperation continues to yield long-term mutual benefits for both our countries. In conclusion, I wish to indicate that since mid-2021, the country has come a long way by now but the journey towards full economic recovery is far from over,” Siriwardana added.