Japan resumes yen loans to Sri Lanka
The Morning: The Japan International Cooperation Agency (JICA) has commenced the disbursement of funds to Sri Lanka under all suspended yen-denominated project loans offered by JICA, the Ministry of Finance reveals.
Speaking to The Sunday Morning Business, Treasury Deputy Secretary R.M.P. Rathnayake revealed that although Sri Lanka’s sovereign debt restructure was yet to be officially concluded, JICA had preemptively commenced the release of fund disbursements under all JICA project loans which had been suspended in 2022 following Sri Lanka’s sovereign default.
“JICA has started the disbursements,” he stated.
Commenting on the possibility of any future loans from JICA, Rathnayake said: “It will depend on their interest and on our proposals. It is too early to comment.”
Traditionally, once a sovereign nation defaults on its sovereign debt, other sovereign nations and multilateral lending agencies will not grant further loans until the defaulting nation restructures its debt.
However, in a benevolent gesture, during Minister of Foreign Affairs Ali Sabry’s visit to Japan in July, Japanese officials had agreed to support Sri Lanka’s development by promptly resuming yen loans for existing projects once the Memorandum of Understanding (MOU) on debt restructuring is signed and the Sri Lankan Government’s intention to swiftly conclude a bilateral agreement is confirmed.
Subsequently, in late July, Sri Lanka successfully entered into an MOU with the Official Creditor Committee (OCC), outlining the details of the nation’s debt treatment.
The Sunday Morning Business recently revealed that JICA had released around $ 50 million under the Bandaranaike International Airport (BIA) terminal expansion project.
OSL take:
Sri Lanka’s development programme presents a host of new business/investment opportunities with funding pledges by multilateral and bilateral financial institutions working towards releasing funding for the country. With Sri Lanka on a path to becoming a hub in the South Asian region, there are many development projects earmarked covering all key economic sectors. These development programmes while presenting direct business/investment opportunities, also present a host of indirect opportunities. Given that foreign funding are resuming for projects and with Sri Lanka being on a growth path with an expanding business potential, foreign businesses/investors could confidently explore the opportunities presented.