Sri Lanka makes debt restructuring deal with Japan, other creditors

Debt-ridden Sri Lanka and its creditor nations, including Japan, reached a basic agreement on Wednesday over Colombo's debt restructuring, a senior Japanese Finance Ministry official said.

The creditor nations and Sri Lanka will work out details and formalize the agreement in a memorandum of understanding, Masato Kanda, vice finance minister for international affairs, told reporters.

Some 20 countries -- led by Japan, France and India -- established a framework earlier this year under which discussions on how to proceed with Sri Lanka's debt restructuring went on to take place. China, Sri Lanka's largest bilateral creditor which is often criticized for employing "debt trap" diplomacy, joined as an observer.

Sri Lanka's financial conditions increasingly worsened during the COVID-19 pandemic and the country defaulted on its foreign debt in 2022. Its external debt totaled $36.6 billion, of which $10.9 billion was owed to bilateral creditor nations as of June this year.

In October, Sri Lanka agreed with the Export-Import Bank of China on a restructuring of $4.2 billion of debt.

© Kyodo News