Japan Resumes Yen Loan Projects in Sri Lanka

Colombo, Jul 24 (PTI) Japan on Wednesday informed Sri Lanka that it will resume funding Yen Loan Projects for the first time since they were suspended in 2022 when the island nation declared bankruptcy.

Tokyo's decision to resume projects came after the successful completion of Sri Lanka's external debt restructuring late last month.

“Following the completion of the signing of a memorandum of understanding between the official creditor committee and Sri Lanka on 23 July and the expression of the willingness by the government of Sri Lanka to swiftly conclude a bilateral agreement on debt restructuring the government of Japan has officially decided to resume disbursement of Yen Loan Projects which had been suspended since the default of Sri Lanka in 2022," a Japanese embassy release said.

Japan temporarily suspended the disbursement of yen loans and other operations related to 11 ongoing projects in Sri Lanka in April 2022 after Colombo declared a temporary suspension of external debt payments in response to the economic crisis and requested assistance from the IMF.

External debt restructuring was a prerequisite for the ongoing International Monetary Fund programme to revive Sri Lanka's bankrupt economy.

Japan commended Sri Lanka's economic reforms set in motion to guide the country back to sustainability.

“All the suspended Yen Loan Projects are crucial infrastructures that promote Sri Lanka's economic growth and further reaffirmed Japan's continuous and unwavering commitment to supporting Sri Lanka," Japanese Ambassador Mizukoshi Hideaki said.

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 make further contributions to the sustainable development and growth of Sri Lanka through the resumption of the disbursement of yen loan projects, the Japanese Foreign Ministry said in a press statement.

Japan hopes that the projects will contribute to stabilising the economy and help gain momentum towards sustainable growth.

Japan in 2020 called for compensation from Sri Lanka when the then government unilaterally suspended the Japanese-funded light rail project for the Colombo city.

Among the main Japanese projects to resume are the terminal expansion in the Colombo International Airport, the development of the Colombo port's Eastern container terminal and a digital broadcasting project, officials said.