Fri Mar 07 16:11:55 UTC 2025: ## Sri Lanka Secures First Official Debt Restructuring Deal with Japan
**Colombo, Sri Lanka** – Sri Lanka achieved a significant milestone in its debt restructuring efforts on Friday, March 7, 2025, signing an agreement with Japan to restructure $2.5 billion in loans. This marks the first deal finalized with an official creditor, a crucial step towards the country’s economic recovery.
The agreement, involving a 369.45 billion yen ($2.5 billion) loan, follows a comprehensive debt treatment plan endorsed by the International Monetary Fund (IMF). Japan’s concessions are considered vital for Sri Lanka’s economic revival. The Japanese Foreign Ministry highlighted the importance of Sri Lanka’s development for the stability and prosperity of the Indo-Pacific region.
Sri Lanka’s Finance Ministry praised Japan’s pivotal role in the restructuring process, commending their “leadership, commitment, and constructive engagement.” This deal follows a June 2024 announcement where Sri Lanka reached an understanding with all bilateral lenders to delay repayments until 2028. However, protracted negotiations delayed formal agreements until Friday’s landmark deal.
While China remains Sri Lanka’s largest bilateral creditor, with $4.66 billion in loans, Japan’s agreement is the first with a member of Sri Lanka’s 17-member Official Creditor Committee (OCC). China, not a member of the OCC, concluded separate debt deals with Sri Lanka last year.
Sri Lanka defaulted on its $46 billion external debt in April 2022. The country’s economy has since improved following an IMF rescue package and austerity measures. In November 2024, the government confirmed a deal to restructure $12.55 billion in international sovereign bonds, a key condition for the IMF’s $2.9 billion bailout loan. A majority of private creditors also agreed to a 27 percent haircut on their loans in September 2024. The IMF bailout, secured in 2023, involved significant tax increases, energy subsidy cuts, and price hikes on essential goods.
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