As part of a critical move towards economic stability, Sri Lanka has completed a $2.5 billion debt-restructuring agreement with Japan, its first major debt deal with an official creditor since the island nation slid into crisis.
Under a comprehensive debt treatment plan, Japan, Sri Lanka’s second-largest bilateral lender, made debt concessions on a 369.45 billion yen ($2.5 billion) loan. The move endorsed by the International Monetary Fund (IMF) is considered indispensable for the country’s economic recovery.
“Sri Lanka, geographically situated in the Indian Ocean, enjoys great importance for Indo-Pacific stability and prosperity of its development,” Japan’s Foreign Ministry said, reiterating its support for the country’s sustainable growth. 
Sri Lanka’s Finance Ministry recognised Tokyo’s key part in the debt restructuring package. Japan’s leadership and effort have been key in helping our economic recovery, the ministry said.
The debt restructuring deal is after long negotiations making Japan the first member of Sri Lanka’s 17 nation Official Creditor Committee (OCC) to seal a deal. China, Sri Lanka’s largest bilateral creditor, however has not yet put in place its debt restructuring terms.
Sri Lanka had defaulted on $46 billion of external debt in April 2022, and slipped into economic crisis. The country has then cut back on spending and secured a $2.9 billion International Monetary Fund rescue package. The new deal represents a step in the right direction regarding somewhat restoring financial stability and revamping confidence here.
