Sri Lanka and Japan signed agreements on Friday to restructure $2.5 billion worth of debt, completing two years of talks that will assist the island nation in getting back on its feet after a severe financial crisis.
The agreements will allow the two countries to restart projects, including an expansion of Sri Lanka's main airport, which were suspended after the island nation announced in April 2022 that it was defaulting on its foreign debt.
The crisis left Sri Lanka struggling to pay for fuel, medicine and cooking gas. But it has made a faster-than-expected recovery, aided by a $2.9 billion bailout from the International Monetary Fund (IMF), which approved the fourth tranche of its program last week.
"Sri Lanka's journey to full economic recovery is far from over. We must continue on the reform path and within the parameters of the IMF program to ensure that Sri Lanka does not fall back into a crisis," Mahinda Siriwardena, Sri Lanka's finance ministry secretary, told reporters at the signing ceremony.
Sri Lanka entered into a preliminary deal with key lenders to restructure bilateral debt last June. It still needs to sign similar agreements with China for about $4.75 billion in debt and with India for $1.4 billion in debt to continue the IMF program.
China and Sri Lanka agreed on more investment and economic cooperation when Chinese President Xi Jinping met recently elected Sri Lankan President Anura Kumara Dissanayake in Beijing in January.
Colombo has also secured a deal to restructure $12.5 billion of its debt with international bondholders in December.
[Reuters]
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The debts restructuring agreement between Japan and Sri Lanka
(Statement by Press Secretary KITAMURA Toshihiro) Ministry of Foreign Affairs of Japan
March 7, 2025
On March 7 (local time), the Notes were signed and exchanged between the Government of Japan and the Government of the Democratic Socialist Republic of Sri Lanka to reschedule a part of the debts of the Sri Lankan government and Airport and Aviation Services (Sri Lanka) Limited owed to the Japan International Cooperation Agency (JICA). Japan welcomes the official completion of the debts restructuring between the two countries by the signing and exchange of the Notes.
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 development of Sri Lanka, which is 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.
(Reference) Overview of the debts rescheduling
Total amount of the debts: approximately 369,453,720,000 yen
Payment method: the Government of the Democratic Socialist Republic of Sri Lanka will repay the above mentioned debts in semi-annual instalments between 5 January 2028 and 5 July 2042.
The interests on the debts:
(a) accrued interest from 1 January 2023 to 31 December 2023 will be paid on 5 July 2025,
(b) interest accruing on or after 1 January 2024 will be paid from 5 July 2025 to 5 July 2042, and
(c) the interest rates on the debts are as follows:
0.96% per annum for the Government of the Democratic Socialist Republic of Sri Lanka and
0.18% per annum for the Airport and Aviation Services (Sri Lanka) Limited.
The agreements will allow the two countries to restart projects, including an expansion of Sri Lanka's main airport, which were suspended after the island nation announced in April 2022 that it was defaulting on its foreign debt.
The crisis left Sri Lanka struggling to pay for fuel, medicine and cooking gas. But it has made a faster-than-expected recovery, aided by a $2.9 billion bailout from the International Monetary Fund (IMF), which approved the fourth tranche of its program last week.
"Sri Lanka's journey to full economic recovery is far from over. We must continue on the reform path and within the parameters of the IMF program to ensure that Sri Lanka does not fall back into a crisis," Mahinda Siriwardena, Sri Lanka's finance ministry secretary, told reporters at the signing ceremony.
Sri Lanka entered into a preliminary deal with key lenders to restructure bilateral debt last June. It still needs to sign similar agreements with China for about $4.75 billion in debt and with India for $1.4 billion in debt to continue the IMF program.
China and Sri Lanka agreed on more investment and economic cooperation when Chinese President Xi Jinping met recently elected Sri Lankan President Anura Kumara Dissanayake in Beijing in January.
Colombo has also secured a deal to restructure $12.5 billion of its debt with international bondholders in December.
[Reuters]
-------------
The debts restructuring agreement between Japan and Sri Lanka
(Statement by Press Secretary KITAMURA Toshihiro) Ministry of Foreign Affairs of Japan
March 7, 2025
On March 7 (local time), the Notes were signed and exchanged between the Government of Japan and the Government of the Democratic Socialist Republic of Sri Lanka to reschedule a part of the debts of the Sri Lankan government and Airport and Aviation Services (Sri Lanka) Limited owed to the Japan International Cooperation Agency (JICA). Japan welcomes the official completion of the debts restructuring between the two countries by the signing and exchange of the Notes.
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 development of Sri Lanka, which is 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.
(Reference) Overview of the debts rescheduling
Total amount of the debts: approximately 369,453,720,000 yen
Payment method: the Government of the Democratic Socialist Republic of Sri Lanka will repay the above mentioned debts in semi-annual instalments between 5 January 2028 and 5 July 2042.
The interests on the debts:
(a) accrued interest from 1 January 2023 to 31 December 2023 will be paid on 5 July 2025,
(b) interest accruing on or after 1 January 2024 will be paid from 5 July 2025 to 5 July 2042, and
(c) the interest rates on the debts are as follows:
0.96% per annum for the Government of the Democratic Socialist Republic of Sri Lanka and
0.18% per annum for the Airport and Aviation Services (Sri Lanka) Limited.
