COLOMBO: Japan, one of Sri Lanka’s biggest creditors, will support the South Asian nation as it seeks to restructure about $30 billion of its external debt and find a way out of a crippling economic crisis , Tokyo’s envoy to the country said on Friday. Reaching an agreement with creditors is essential for Sri Lanka to secure a $2.9 billion bailout package from the International Monetary Fund (IMF).
“Japan stands with Sri Lanka to support the debt restructuring negotiation process so that Sri Lanka can reach a final agreement with the IMF,” Ambassador Hideaki Mizukoshi said in an interview. $10 billion, or 4.4% of the island’s GDP, according to government and IMF data.
Japan is also a major trading partner. “Japan intends to play a constructive role with other creditor countries, including China and India,” Mizukoshi said. Sri Lanka is facing its worst economic crisis in decades, with severely depleted foreign exchange reserves leading to prolonged shortages of basic necessities including fuel and food.
The financial crisis is the result of economic mismanagement and the impact of the COVID-19 pandemic which has upended Sri Lanka’s lucrative tourism industry.
Although Japan supports the debt negotiation process, Mizukoshi said talks on major infrastructure projects will resume only after the Sri Lankan economy recovers. those kinds of discussions,” he said.
Sri Lanka has suspended a Japanese-funded $1.5 billion light rail project for the commercial capital Colombo in 2020, citing financial concerns.
Regional rival China has built ports, highways and power stations on the island as part of its Belt and Road Initiative, prompting concern from Sri Lanka’s northern neighbor India. Lanka. Japanese companies have been investing in Sri Lanka since the 1970s, particularly in the electronics, ceramics and engineering sectors. But investments have been crippled due to inconsistent economic policies and procedural hurdles, Mizukoshi said.
“I hope these things will be improved,” he said. “We hope that the investment environment in Sri Lanka will improve.” -REUTERS.