The International Monetary Fund’s anticipated endorsement of Sri Lanka’s reforms and debt restructuring is expected to unlock funding of about 220 billion yen ($1.6 billion) for projects suspended by Japan, people familiar with the matter said.

IMF board approval, when it arrives, should help convince the Japanese government to restart several projects that are in different stages of completion, the people said, asking not to be named as the information is not public. The projects involve a 74 billion yen upgrade to the South Asian island’s main international airport, and others including energy, water supply, rural infrastructure and waste management, the people said. 

Cabinet spokesman Bandula Gunawardana told reporters in Colombo Wednesday that Sri Lanka is expecting a restart of suspended loans, including from JICA. A spokesperson for JICA in Tokyo confirmed the importance of IMF decisions, while declining to elaborate on their effects on Japanese projects in Sri Lanka. 

Resumption of JICA funding will help bolster development financing for the crisis-ridden nation that is looking to turn a corner from its worst economic crisis. While countries such as India continued financing big infrastructure projects despite Sri Lanka defaulting on its overseas debt last year, Japan halted funding, and provided only humanitarian support. 

The IMF said this week that its board will vote on the $2.9 billion bailout on March 20. The approval could also pave the way for financing from other creditors, including the Japan International Co-operation Agency, World Bank and the Asian Development Bank. 

Sri Lanka in Talks With ADB, World Bank for Post-IMF Financing

Sri Lanka may have to sign new agreements, with revised timelines for the loans, the people said, without giving further details. 

Source - Bloomberg
-Agencies