WEB DESK
Japanese and Sri Lankan leaders on Thursday confirmed the importance of “transparent and fair” debt restructuring, apparently warning against China’s alleged debt-trap diplomacy, which uses loans as leverage to gain concessions from borrower nations.
The agreement came during a meeting in Tokyo between Japanese Prime Minister Fumio Kishida and Sri Lankan President Ranil Wickremesinghe, who expressed appreciation for the Asian country’s role in restructuring his nation’s debt.
Sri Lanka defaulted on its debt in April 2022 amid the worst economic crisis since the South Asian country, with a population of 22 million, gained independence from Britain in 1948, with China emerging as the biggest bilateral creditor to the nation in recent years.
Japan, France and India have launched an initiative to coordinate the restructuring of Sri Lanka’s hefty loans among its creditors. The first meeting of the nation’s lenders was held earlier this month, which Beijing attended as an observer.
Sri Lanka will be able to conclude the debt restructuring talks “by September or November at the latest,” Wickremesinghe told Kishida, adding, “That would mean the end of the phase of Sri Lanka’s economic crisis.”
The IMF has emphasized the need for timely restructuring pacts with Sri Lanka’s creditors, acknowledging the country’s improving macroeconomic situation. Previously, the IMF projected a contraction in Sri Lanka’s economy this year, but recent developments indicate positive signs of recovery.
Sri Lanka currently owes $7.1 billion to its creditors, with China, India, and the Paris Club as the major lenders. As Sri Lanka continues its efforts to navigate the economic crisis and attract investments, collaboration with international partners, including Japan, will play a crucial role in revitalizing the country’s economy and fostering long-term sustainable growth
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