Sri Lanka and Japan have reached an agreement to revitalize their bilateral projects, with a focus on resuming the $1.5 billion Japanese-funded light railway that had been halted. This development arose during Japanese Foreign Minister Yoko Kamikawa's visit to Sri Lanka, where both nations expressed a commitment to work together on these projects.
Sri Lanka is currently in the process of restructuring its foreign debt after experiencing its worst financial crisis in over seven decades in 2022, which led to a foreign debt default. As part of a $2.9 billion bailout from the International Monetary Fund (IMF), Sri Lanka is engaged in efforts to address its financial challenges. Japan, as a key partner, is looking forward to the prompt signing of a memorandum of understanding between Sri Lanka and the official creditor committee responsible for aiding in restructuring Sri Lanka's bilateral debt.
During her visit, Kamikawa emphasized Japan's readiness to provide further assistance to Sri Lanka's development by promptly resuming yen loan projects once the memorandum of understanding on debt restructuring is finalized. Sri Lanka, in turn, expressed its commitment to swiftly concluding a bilateral agreement, signaling a renewed partnership between the two countries. Sri Lanka's decision to pull out of the rail project in 2020, amidst closer ties with China at the time, gave way to the recent approval by the Sri Lankan cabinet to reactivate projects with Japan under President Ranil Wickremesinghe's guidance. With Japan being Sri Lanka's primary bilateral lender after China, both countries are working towards solidifying their cooperation and resolving financial matters in a timely manner. Sri Lanka's Foreign Minister Ali Sabry expressed confidence in reaching the necessary agreements swiftly to successfully complete the upcoming IMF review.