No new yen loan from Japan until suspended project implementation is successful

•  Keen to resume projects stalled due to economic crisis
• LRT in the pipeline, to be considered as a new project

By Kelum Bandara  

Hot on the heels of the successful conclusion of bilateral debt restructuring, Japan has taken up the position that any new yen loan will be considered for Sri Lanka depending on the successful implementation of the projects suspended due to the economic crisis and subsequent confidence building, a top source said.  

Foreign Affairs Minister Ali Sabry, who was in Japan on an official visit, discussed the resumption of all the suspended projects. The top source said Japan is keen to restart these projects once paperwork and other formalities are completed.   

In the midst of the economic crisis, Japan has halted 12 projects under Japan International Cooperation Agency (JICA) including the expansion of the Bandaranaike International Airport.  
However, Japan is not ready to start any new yen loan projects in Sri Lanka until it feels confident about the successful implementation of the stalled projects.  

Asked about the light rail project (LRT) that was cancelled by the Gotabaya Rajapaksa government even leading to disagreement with Japan, the source said, “It is in the pipeline to be considered as a new project. The old project has been cancelled. It won’t be resumed. If a LRT project is considered, it will be a new project,”  

Sri Lanka pulled out of the US $ 1.5 billion rail project in 2020.   

President Ranil Wickremesinghe also expressed interest in launching the LRT project with Japanese assistance.  

Bilateral creditors account for 28.5 percent of Sri Lanka’s current outstanding foreign debt of US $37 billion, according to treasury data at the end of March. China is the largest single bilateral lender, accounting for US $4.66 billion and Japan second with US $2.35 billion.   ​