Sri Lanka is witnessing renewed international support as it implements critical measures to emerge from its economic crisis. Japan has announced the resumption of funding for stalled infrastructure projects, marking a significant milestone in Sri Lanka’s debt restructuring efforts. This development follows the completion of a $10 billion restructuring agreement with official creditors, including Japan, China, and India.
Japan, co-chairing the Official Creditor Committee alongside France and India, has been instrumental in Sri Lanka’s debt restructuring process. The signing of the Memorandum of Understanding on debt restructuring was finalized on July 23, with the Sri Lankan government swiftly moving to conclude a bilateral agreement with Japan. As a result, Japan has decided to resume disbursement of yen loans for 11 ongoing projects, injecting $1.1 billion over the next five years.
The projects set to resume include the expansion of Sri Lanka’s main international airport, as well as water sanitation, healthcare, and other vital infrastructure initiatives. Mizukoshi Hideaki, Japan’s ambassador to Colombo, emphasized Japan’s commitment to Sri Lanka’s sustainable development, highlighting the strategic importance of the island nation in the Indo-Pacific region.
In parallel, India has increased its budget allocation for Sri Lanka, earmarking INR 245 crore for the fiscal year 2024-2025, up from INR 150 crore last year. This financial support is directed towards infrastructure development and economic recovery, reinforcing India’s role in aiding Sri Lanka’s resurgence.
Sri Lanka’s economic outlook is also buoyed by the International Monetary Fund (IMF) program, which secured $2.9 billion in lending last year. This, combined with the resumed funding from Japan and increased support from India, positions Sri Lanka for a 3% economic growth in 2024.
Sri Lanka’s efforts to restructure its debt and secure international backing underscore a concerted push towards recovery. The government’s proactive measures and the robust support from key international partners highlight a path to stability and prosperity for the island nation.
