Wednesday Nov 06, 2024
FT
Wednesday Nov 06, 2024
Monday, 31 July 2023 00:09 - - {{hitsCtrl.values.hits}}
Japan on Saturday said resolving Sri Lanka’s external debt burden is an urgent priority to commit further financial support.
Japan pressed bankrupt Sri Lanka on Saturday to expedite its debt restructuring, including with its biggest creditor China, to stabilise the island nation's economy after an unprecedented crisis.
“For us now the important thing is this debt restructuring process will go as quickly as possible, as smoothly as possible,” Japanese foreign ministry spokeswoman Yukiko Okano told reporters in Colombo according to AFP.
She said that resolving Sri Lanka’s debt burden remained an urgent priority to unlock further funding for the island.
She also said Japan had been assured that all bilateral creditors will be offered “comparable treatment”.
There have been fears among Sri Lanka's creditor nations that China may ask for more favourable terms, leaving others to carry a bigger share of the restructures’ burden.
Tokyo’s Foreign Minister Yoshimasa Hayashi welcomed economic reforms under the auspices of an International Monetary Fund bailout but said Sri Lanka needed to pick up the pace in its negotiations with creditors.
“I conveyed my expectations for further progress in the debt restructuring process,” Hayashi told reporters after his one-day visit.
China holds about 52% of Sri Lanka's bilateral credit, with Japan and India the next biggest lenders.
All bilateral creditors except China have pledged to support a plan to delay repayments on loans.
Beijing has been reluctant to agree to a debt deferral and instead initially offered more loans to pay off older debt, a move unacceptable under IMF bailout rules.
China's delay held up a $ 2.9 billion IMF bailout which was finally granted in March, almost a year after Colombo defaulted on its $ 46 billion foreign debt.
Sri Lanka must secure agreement from all official creditors and a majority of private bondholders to draw down its second IMF instalment of $ 330 million in September.
Under Colombo's proposal, bilateral lenders are spared a haircut on loans but will be asked to extend maturity by up to 15 years at an annual fixed interest rate of 1.5%, with a nine-year moratorium on interest payments.
Okano added that Japan was concerned about China's big infrastructure projects in Sri Lanka and elsewhere in the region as they did not meet international finance standards.
Unable to repay a huge loan taken from China in 2017 to build a deep sea port in southern Hambantota, Sri Lanka handed it over to a Chinese firm for $ 1.12 billion on a 99-year lease.
