China remains Sri Lanka’s largest bilateral lender, accounting for US$4.66 billion of the US$10.58 billion borrowed from other nations. Japan is the second-largest, with just over US$2.5 billion in loans.
Sri Lanka had concluded debt deals with the Export-Import Bank of China and the China Development Bank last year.
Japan is the first country in the 17-member Official Creditor Committee (OCC) of Sri Lanka to ink a debt deal, Sri Lankan officials said. Beijing is not a member of the OCC.
The government of leftist President Anura Kumara Dissanayake, which came to power in September, had hoped to finalise debt deals before the end of last year.
The island nation defaulted on its US$46 billion external debt in April 2022 after running out of foreign exchange to finance even the most essential imports, such as food and fuel.
Its economy has since recovered following an IMF rescue package and the implementation of austerity measures aimed at repairing the government’s ruined finances.
In November, Dissanayake announced that Sri Lanka would honour a deal secured by his predecessor to restructure US$12.55 billion in international sovereign bonds, a key condition for maintaining the US$2.9 billion, four-year IMF bailout loan.
A majority of private creditors to the South Asian nation agreed in September to a 27 per cent haircut on their loans.
Sri Lanka secured its IMF bailout in 2023 after doubling taxes, withdrawing energy subsidies, and raising the prices of essential goods to shore up state revenue.
