Japan demands repayment as SL seeks project resumption
January 14, Colombo (LNW): Japan announced that for the resumption of stalled projects, Sri Lanka is required to settle the outstanding amount related to the cancellation of the Colombo Light Rail Transit Project (LRT).
During a two-day official visit to the island-nation, Japanese Finance Minister Suzuki Shunichi underscored this point in discussions with President Ranil Wickremesinghe and Opposition Leader Sajith Premadasa.
In March 2019, the Japanese government had approved a loan assistance package of US$ 1,800 million for the LRT system project, initially scheduled for implementation that same year with completion targeted for 2026.
The project aimed to address traffic congestion in Colombo and its suburbs.
The Japan International Cooperation Agency (JICA) had committed to providing financial facilities under concessionary credit conditions.
Concurrently, the Oriental Consultants Global Company of Japan, in collaboration with several other firms, was engaged to offer consultancy services.
On March 11, 2019, a loan agreement was signed between Japan and Sri Lanka, accompanied by exchanged notes outlining the project details. The initiative envisioned the construction of a 17km-long elevated rail track featuring 16 stations, connecting vital intersections from Malabe to Colombo Fort.
The proposed service entailed the deployment of 25 trains, each comprising four air-conditioned passenger compartments capable of accommodating 800 passengers.
The total estimated cost for the project was Japanese Yen 246,641 million, with JICA committed to providing JPY 200,415 million (approximately USD 1,800 million) as a concessionary loan.
The repayment terms allowed for a 40-year period, including a grace period of 12 years, with an annual interest rate of 0.1 percent.
However, in September 2020, the Cabinet of Ministers at the time approved the termination of the project, citing substantial operating costs and environmental concerns, among other reasons.
A December 2022 report from the National Audit Office revealed a financial loss of Rs. 5,978 million incurred by Sri Lanka following the unilateral termination of the LRT project by the former President Gotabaya Rajapaksa-led government.
In May 2023, the current Cabinet of Ministers decided to revive the project, coinciding with President Wickremesinghe’s official visit to Japan.
The revival decision was motivated by the aim to restore Sri Lanka’s credibility with the international community.