Highlighting the pivotal role of Sri Lanka's economic stability in the broader Indo-Pacific region, Japan's Foreign Minister, Yoko Kamikawa, underscored the urgency for Colombo to swiftly address its foreign debt restructuring.

Following discussions with her Sri Lankan counterpart, Kamikawa emphasized the need for Colombo to secure agreements with bilateral lenders and international sovereign bondholders to unlock suspended foreign funding.

Sri Lanka, which defaulted on its $46 billion external debt in April 2022, aimed to finalize deals with foreign creditors by April. However, no final agreements have been reached thus far.

Kamikawa stressed the importance of reaching a debt restructuring agreement with all creditors, including China, the largest bilateral lender to the island. She conveyed Japan's intention to resume existing yen loan projects swiftly after a debt restructuring deal is secured.

Recognizing Sri Lanka's strategic location along the main east-west international shipping route, Kamikawa emphasized that Tokyo considers Colombo's economic recovery crucial for regional stability. The restoration of stability and economic development in Sri Lanka is deemed essential for the prosperity of the entire Indo-Pacific region.

Sri Lanka's efforts to continue a four-year $2.9 billion bailout loan initiated since March last year hinge on securing agreement from all official creditors and a majority of private bondholders.

Japan, as the second-largest bilateral lender to Sri Lanka, has expressed concerns about China's substantial infrastructure projects in the country and across the region, citing discrepancies with international finance standards.

Sri Lanka's inability to repay a massive loan obtained from China in 2017 for the construction of a deep-sea port in Hambantota led to the transfer of the port to a Chinese firm for $1.12 billion on a 99-year lease.

The economic challenges faced by Sri Lanka, including chronic shortages of food, fuel, and medicines in 2022, culminated in then-president Gotabaya Rajapaksa's resignation in July 2022 amid allegations of mismanagement and corruption.

Under the leadership of Ranil Wickremesinghe, Sri Lanka has implemented tax increases, subsidy cuts, and painful economic reforms in alignment with an IMF bailout program.

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