Tetsuji Kajimoto and Takaya Yamaguchi
TOKYO (Reuters) – Japan is seeking to organize a meeting of Sri Lankan creditors, hoping it will help resolve the South Asian country’s debt crisis, but uncertainty remains The prospects for any negotiations are clouded, three people familiar with the plan said.
Tokyo is willing to hold talks among all creditor nations aimed at lifting Colombo out of its worst debt crisis since independence, but one of its sources told Reuters it was unclear what was the top creditor, China Whether it will join, Sri Lanka’s financial situation remains unclear.
Japan is willing to host if talks with China can be expedited, and the bilateral debt is estimated at $6.2 billion at the end of 22, the source said.
President Ranil Wickremesinghe told Reuters last week that Sri Lanka will ask Japan to invite major creditors to negotiate a bilateral debt restructuring. He said he would discuss the issue with Japanese Prime Minister Fumio Kishida in Tokyo next month, when he will attend the funeral of assassinated former Prime Minister Shinzo Abe.
Tokyo, the second-biggest creditor, has rescued its stake in Sri Lanka, not only to recoup its $3 billion loan, but also to curb the diplomatic interests of China’s growing presence in the region.
S&P Global (NYSE: SPGI ) rated Sri Lanka government bonds this month after default on interest and principal payments Downgraded to default. The southern tip of India is an island country with a population of 22 million people, whose debt accounts for 114% of annual economic output, is socially and in many years Economic mismanagement based on financial turmoil brought on by the COVID-19 pandemic.
International Monetary Fund (IMF) team met with Wickremesinghe on Wednesday to discuss rescue package, including restructuring 29 billion-dollar debt as Colombo seeks a $3 billion IMF bailout package.
Tokyo sees a need for a new “platform” to pull creditors, presidential sources said.
A source said.
“Japan is keen to push this process forward. But it is not a matter for Japan alone to raise its hand,” the source said, adding that the cooperation of other countries critical.
J Asia’s foreign ministry declined to comment. Sri Lanka’s central bank and finance ministry did not immediately respond to requests for comment. An IMF spokesman declined to comment.
New framework needed
Concerns include competition and territorial tensions between big creditors China and India, while Sri Lanka will have to commit to reforms, sources said, its financials and disclose more information about its debt.
Last month, shortly after Wickremesinghe took office, after his predecessor fled the country, Chinese President Xi Jinping wrote to him that he was “ready” to serve Wickremesinghe The efforts of President Lemasinghe and the people of Sri Lanka provide support and assistance within their capacity.”
But sources say China is reluctant to “cut” its loans and ease Colombo due to factors such as being a large lender
A Chinese foreign ministry spokesman told Reuters that Beijing was “willing to endure to cooperate with relevant countries and international financial institutions to continue to play an active role in helping Sri Lanka cope with the current difficulties, reduce its debt burden and achieve sustainable development.
Japan would like to see a similar group of 22 large economies targeting low-income countries. Sri Lanka does not belong to this ‘common framework’ “, because it is classified as a middle-income emerging country.
“It has to be a platform where all creditor countries are involved” to ensure they all take on debt, another source said. A third said, “Until these conditions are met, it will be very difficult for any negotiation to succeed. “
G114 sponsored common framework and 2020 the Paris Club of rich creditors, Debt relief is provided primarily by extending debt repayments and reducing interest payments.
Some stakeholders believe that an initial creditors meeting may be held in September, but One source said it would “take a little while, maybe months.”
Restructuring is only possible after the IMF reviews Sri Lanka’s debt, the source said Negotiation.
