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Japan resumes funding for 11 stalled projects; other donor nations will also follow
View(s):By Bandula Sirimanna
Japan will resume funding 11 stalled infrastructure projects, including the expansion of the Bandaranaike International Airport, after Sri Lanka successfully restructured its foreign debt.
The 11 Japanese-funded projects are: Kalu Ganga Water Supply Expansion Project, Anuradhapura North Water Supply Project , Kalu Ganga Water Supply Expansion Project, Kandy City Wastewater Management Project, Project for Formulation of Western Province Solid Waste Management Master Plan, Project on Capacity Development for Urban Planning, Water Engineering and Utility Management Future Leaders Training Programme, the Project for Human Resource Development Scholarship, Project for Capacity Development on Effective Public Investment Management, Digitalization of Terrestrial TV Broadcasting Project and a programme for development support of fishing and agrarian villages/Dairy Development Project in Northern Province in Sri Lanka.
Japan resumes funding for 11 stalled projects in Sri Lanka; donors to follow
This decision follows the signing of a memorandum of understanding (MOU) between the Official Creditor Committee (OCC) and Sri Lanka on July 23, with the Sri Lankan government committed to finalising a bilateral debt restructuring agreement.
The resumption of Japanese funding for Sri Lanka’s infrastructure projects marks a significant step in the country’s recovery efforts following its financial crisis and debt restructuring.
Japan’s Foreign Minister Kamikawa Yoko disclosed that following Sri Lanka’s debt restructuring, Japan would resume yen loans and other operations related to ongoing projects.
Japan has been a strong supporter of Sri Lanka’s debt restructuring efforts, co-chairing the Official Creditor Committee with France and India.
Bilateral lenders like Japan halted project funding when Sri Lanka suspended the debt servicing of US$46 billion of foreign debt two years ago during a severe economic crisis.
“Japan is the first country to resume financing for the suspended projects,” Japan’s ambassador Hideaki Mizukoshi said.
A senior Finance Ministry official said project finance fostered economic growth crucial for Sri Lanka’s current financial development needs.
He confirmed that Japan will release an initial tranche of about $75 million for the 11 projects.
The official noted that Japan’s official announcement would lead to the unlocking of foreign financing for 200 other development projects by donor countries like South Korea, Spain, France, Sweden, Germany, and the Netherlands, along with multilateral agencies.
Japan’s total loan portfolio in Sri Lanka is estimated at $2.36 billion, with an additional $1.1 billion committed for ongoing projects to be disbursed over the next five years.
Sri Lanka’s relationship with Japan had been strained in recent years, particularly after former President Gotabaya Rajapaksa, who favoured closer ties with China, scrapped a JICA-funded light railway project and cancelled a $500 million trilateral deal with India and Japan to develop the Eastern Container Terminal at Colombo Port.
Since 1965, Japan has provided Official Development Assistance totalling $8.8 billion for 120 development projects in Sri Lanka.
Currently, 11 projects valued at about $2.5 billion are being implemented under JICA loan assistance in sectors such as power, water supply, drainage, ports, transport, health, telecommunication, and rural development.
Despite Sri Lanka’s economic and political issues, JICA has continued to support various projects, including a $300 million technical cooperation project with the Ministry of Health to combat COVID-19. This project provided essential equipment and training to targeted hospitals.
A senior finance ministry official confirmed that Japan’s recession would not impact JICA projects in Sri Lanka, as these were prior commitments. The Anuradhapura North Water Supply Project, backed by JICA, will also proceed unaffected by Japan’s economic situation.
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