Why Solving Sri Lanka's Debt Crisis Could Be Important For Japan

Japan, the second-biggest creditor to Sri Lanka, is trying to organize a creditors' conference in hopes that it could help solve the island nation's debt crisis, reported Reuters. 

Tokyo’s move could not only be seen as a step toward recouping its $3 billion in loans, but also in line with protecting its diplomatic interest at a time when China’s presence is growing in the region.

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Sri Lankan President Ranil Wickremesinghe told Reuters the island nation would ask Japan to invite the main creditor nations to talks for restructuring bilateral debts. At the end of 2020, Sri Lanka’s debt is estimated at $6.2 billion on a bilateral basis, according to the report.

However, uncertainties hang over any potential talks, the report said, citing sources. It is not yet clear whether top creditor China would join the talks, it stated.

Last month, soon after Wickremesinghe took office, Chinese President Xi Jinping wrote to him stating he was "ready to provide support and assistance to the best of my ability to President Wickremesinghe and the people of Sri Lanka in their efforts", the report said.

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IMF Meeting: On Wednesday, an International Monetary Fund (IMF) team met Wickremesinghe in order to discuss a bailout, including restructuring $29 billion in debt, the report said.

Japan's Foreign Ministry and an IMF spokesperson had declined to comment, Reuters reported.

Downgrade: S&P Global has downgraded Sri Lanka's government bonds to default after it missed interest and principal payments.

Illustration by garmoncheg on Shutterstock