Sri Lanka clinches deal with Japan to restructure $2.5 billion in debt

Colombo: 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.