Sri Lanka seeks upto US$3.5 b loan from Japan
Sri Lanka’s debt-ridden government is now negotiating a fresh financial relief package from Japan amounting to between $2billion and $3.5 billion similar to Indian assistance of US$ 900 million granted to Sri Lanka recently, with the aim of overcoming the current economic crisis.
The exact amount of the planned swap of the loan into dollars is yet to be finalised as it depends on the outcome of the ongoing negotiations, a senior official who wished to remain anonymous told the Business Times.
Japan has historically been a major source of development aid for Sri Lanka, providing the country not just with financial but also technical assistance.
The Japanese loan will further deepen the bilateral relationship between the two states, which has been amicable under the present government, he said.
He added that for Sri Lanka the loan offers the opportunity to restructure its financial liabilities on more favourable terms.
The loan from Japan may be from a Japanese agency or institution and it will be issued in Japanese yen and carry an interest rate of just 0.05 per cent, informed sources said.
The Finance Ministry will also enter into foreign financing agreements with foreign development partners including Japan and lending agencies to support the public investment programme this year.
Sri Lanka anticipates more financial commitment considering the urgent needs of the country to support the budgetary activities, he pointed out.
Sri Lanka faces one of its worst economic crises, with foreign reserves which stood at around $3.1 billion, enough for a few months of imports.
It also has foreign debt obligations over $6 billion this year, including repayment of bonds worth $500 million in January 18 and $1 billion in July.
The cash strapped government is to pursue further loans from other multilateral lending agencies (such as the World Bank) and other bilateral agencies, particularly those in India and China.
For the development support it will seek access to financial assistance from multilateral lending agencies and foreign governments.
The Finance Ministry has requested Japan to restructure (Sri Lanka’s) debts and access to preferential credit for imports of essential goods, as the island nation struggles in its worst economic crisis,
Under the Indian line of credit, Sri Lanka is to purchase 500 mini buses for commuter transport services and 750 jeeps for the Police Department.
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