Japan to coordinate with Sri Lanka creditors to resolve debt crisis

Japanese Finance Minister Shunichi Suzuki attends the G20 Finance Ministers Meeting in Nusa Dua, Bali, Indonesia July 16, 2022. Sonny Tumbelaka/Pool via REUTERS

TOKYO – Japan will coordinate with other creditors to resolve Sri Lanka’s deepening financial crisis, Finance Minister Shunichi Suzuki said on Tuesday, urging all creditor nations to gather and discuss the South Asian nation’s debt at the same table.

“We are concerned about Sri Lanka’s severe socio-economic situation,” Suzuki told reporters.

Sri Lanka must accelerate talks with the International Monetary Fund (IMF) on a bailout, while all bilateral creditors, including China and India, must gather to discuss the issue, Suzuki said.

“Japan wants to actively cooperate with other creditor countries and public organizations.”

Japan is seeking to organize an all creditors’ conference, hoping it could help solve Sri Lanka’s debt crisis, and it is open to hosting such talks possibly with China, sources with knowledge of the situation told Reuters last week.

It remains unclear whether top creditor China would join and a lack of clarity remains about Sri Lanka’s finances, one source told Reuters.

President Ranil Wickremesinghe told Reuters this month that Sri Lanka would ask Japan to invite the main creditor nations to talks on restructuring bilateral debts. He said he would discuss the issue with Prime Minister Fumio Kishida in Tokyo next month.

“I believe it is important for the Sri Lankan government to try to improve its economic and fiscal conditions in coordination with the IMF, Paris Club (of major creditor countries) and others, while maintaining transparency,” Japanese Foreign Minister Yoshimasa Hayashi said.

“We plan to consider our response, while watching such moves and the situation in Sri Lanka, and consulting with Sri Lanka, other donors and international organizations.”

The island nation of 22 million people off India’s southern tip, with debt at 114 percent of annual economic output, is in social and financial upheaval from the impact of the COVID-19 pandemic, severely depleted foreign reserves and runaway inflation.

An IMF team met Wickremesinghe on Wednesday to discuss a bailout, including restructuring $29 billion in debt, as the country seeks a $3 billion IMF aid program.