Sri Lanka Secures Debt Lifeline: Historic Deal with Japan

Sri Lanka has signed a significant debt restructuring agreement with Japan. Involving 369 billion yen, the deal modifies payment schedules and aims to restore investor confidence. Signed under the Official Creditor Committee, the agreement highlights Japan's strategic support in Sri Lanka's economic recovery and Indo-Pacific stability.

Sri Lanka took a notable step in combating its ongoing economic crisis by securing a debt restructuring agreement with Japan on Friday. The deal involves debts amounting to 369,453,720,000 yen, equivalent to approximately USD 2.50 billion, to be paid in semi-annual instalments from January 2028 to July 2042, as announced by the Japanese foreign ministry.

The agreement is significant as it marks the first conclusion of a bilateral debt restructuring arrangement between an Official Creditor Committee (OCC) member and Sri Lanka following a previous Memorandum of Understanding. The OCC, co-chaired by Japan, India, and France, was established in response to Sri Lanka's suspension of external debt payments in April 2022.

Japan emphasizes the importance of Sri Lanka's development for Indo-Pacific stability and pledges ongoing support. Experts suggest Japan's concessional financing and development aid have been pivotal to Sri Lanka's economic recovery. This restructuring deal is expected to boost investor confidence and pave the way for further international financial assistance.

(With inputs from agencies.)