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Japan Weighs New Yen Loans for Sri Lanka Amid Economic Recovery

Following the successful conclusion of bilateral debt restructuring, Japan has indicated that any new yen loans for Sri Lanka will depend on the successful implementation of projects previously suspended due to the economic crisis and subsequent confidence-building measures, according to a top source.

During an official visit to Japan, Foreign Affairs Minister Ali Sabry discussed the resumption of all suspended projects. The top source noted that Japan is keen to restart these projects once paperwork and other formalities are completed.

Amid the economic crisis, Japan halted 12 projects under the Japan International Cooperation Agency (JICA), including the expansion of Bandaranaike International Airport. Japan has stated that it will not initiate any new yen loan projects in Sri Lanka until it is confident in the successful implementation of the stalled projects.

Regarding the light rail project (LRT) cancelled by the Gotabaya Rajapaksa government, the source explained, “It is in the pipeline to be considered as a new project. The old project has been cancelled. It won’t be resumed. If an LRT project is considered, it will be a new project.” Sri Lanka withdrew from the US $1.5 billion rail project in 2020.

President Ranil Wickremesinghe has also expressed interest in launching the LRT project with Japanese assistance.

Bilateral creditors account for 28.5 percent of Sri Lanka’s current outstanding foreign debt of US $37 billion, according to treasury data as of the end of March. China is the largest single bilateral lender, accounting for US $4.66 billion, with Japan following at US $2.35 billion.

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