Japan to Coordinate With Sri Lankan Creditors to Restructure Foreign Debt, Finance Minister Says

Japan is among Sri Lanka’s biggest bilateral creditors, with its loans to Colombo totalling around $3 billion. Sri Lankan President Ranil Wickremesinghe said in an interview this month that he would ask Japan to invite the country’s main creditors for a conference in order to reach a consensus on the debt restructuring programme.

Japanese Finance Minister Shunichi Suzuki has said that Tokyo would coordinate with Sri Lanka’s foreign creditors in order to help the island nation restructure its debt.

He said that it was important for Sri Lanka’s foreign creditors to gather and discuss the issue, as per Reuters.

The remarks by the Finance Minister were made hours after Japanese Foreign Minister Yoshimasa Hayashi said at a regular press conference that Tokyo was yet to approach any third government on the matter.

"We are having various interactions with the Sri Lanka side, but no preparation is going on with Sri Lanka for holding such talks," Hayashi stated.

Previously, a media report suggested that Tokyo was willing to chair a conference of Sri Lanka’s foreign creditors should Beijing also agree to attend the multilateral event.

Sri Lankan President Ranil Wickremesinghe has said that he would hold consultations with Japanese Prime Minister Fumio Kishida on the matter when the two leaders meet on the sidelines of ex-Prime Minister Abe Shinzo’s funeral in Tokyo on September 27.

Around 10 percent of Sri Lanka’s foreign debt of nearly $51 billion is owed to Beijing, which has so far remained non-committal on restructuring its loans to Colombo. Sri Lanka announced a default on its foreign debt in April.

The International Monetary Fund (IMF) has said that Colombo’s foreign creditors must agree to restructure their debt before it could approve a bailout package for the crisis-hit island nation, which is facing its worst economic downturn since Independence in 1948.

Sri Lanka is seeking roughly $4 billion from the IMF under an Extended Fund Facility (EFF) in order to pay for fuel and other essential imports, which have been in short supply owing to depleting forex reserves.

Several of Sri Lanka’s creditors, including Japan, have also expressed their reluctance to provide financial aid to Colombo till the government is able to get a bailout package from the IMF.

In fact, Sri Lankan Shipping Minister Nimal Siripala de Silva told Parliament this month that Tokyo has suspended work on 12 infrastructure and development projects in the South Asian nation, pending the approval of the EEF by the International Monetary Fund.

An IMF delegation is currently on a visit to Sri Lanka in order to try and reach a staff-level agreement on an IMF package.

“Because Sri Lanka’s public debt is assessed as unsustainable, approval by the IMF Executive Board of the EFF program would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored,” a statement from the IMF said on 19 August.

Meanwhile, President Wickremesinghe will present the federal budget in the Parliament later on Tuesday, a first since the economic crisis erupted this year in the island nation.