The International Monetary Fund’s (IMF) eivident endorsement of Sri Lanka’s reforms and debt restructuring program is set to unlock funding of about 220 billion yen (US $1.6 billion) for projects suspended by Japan, official sources said
This was an immediate response to Prime Minister Dinesh Gunawardena’s appeal to Japan International Cooperation Agency (JAICA) to recommence all the ongoing projects that are temporarily halted due to fiscal issues.
According to the Prime Minister’s Office, he made this request when JAICA Director General for South Asia, Ito Teruyuki called on him recently
Teruyuki has assured the Prime Minister that JAICA projects would be resumed no sooner after the debt restructuring programme is finalised with the IMF, the PM’s office stated.
US$ 2.5 billion worth of 12 JAICA projects have been temporarily halted due to the fiscal crisis. JAICA delegation expressed satisfaction over the progress in debt restructuring plans, in which Japan also played a major role.
The Prime Minister thanked JAICA Director General for the continuous assistance provided to Sri Lanka for several decades for water treatment, sewerage, sanitation and solid waste treatment projects in several cities and towns.
He also requested JAICA to provide assistance in new areas such as renewable energy and electrification of public transport and railways.
Prime Minister Gunawardena also briefed the JAICA delegation about the steps taken to improve transparency and accountability in project implementation by enacting required legislation as recommended by the Committee appointed by the President.
He added that a Budget Act would be passed to ensure the continuation of nationally important projects and policies despite changes of governments in power.
IMF board approval, when it arrives, should help convince the Japanese government to restart several projects that are in different stages of completion, officials said
The projects involve a 74 billion yen upgrade to the South Asian island’s main international airport, and others including energy, water supply, rural infrastructure and waste management, they added.
Cabinet spokesman Bandula Gunawardana told reporters in Colombo Wednesday that Sri Lanka is expecting a restart of suspended loans, including from JICA. A spokesperson for JICA in Tokyo confirmed the importance of IMF decisions, while declining to elaborate on their effects on Japanese projects in Sri Lanka.
Resumption of JICA funding will help bolster development financing for the crisis-ridden nation that is looking to turn a corner from its worst economic crisis.
While countries such as India continued financing big infrastructure projects despite Sri Lanka defaulting on its overseas debt last year, Japan halted funding, and provided only humanitarian support.
The IMF said this week that its board will vote on the $2.9 billion bailout on March 20. The approval could also pave the way for financing from other creditors, including the Japan International Cooperation Agency, World Bank and the Asian Development Bank.
Sri Lanka in Talks With ADB, World Bank for Post-IMF Financing.Sri Lanka may have to sign new agreements, with revised timelines for the loans, officials said, without giving further details.