In a renewed call for urgency, Japan has reiterated the critical importance of promptly finalizing the Memorandum of Understanding (MoU) between Sri Lanka and creditor nations concerning the island nation's debt restructuring. The statement follows a preliminary agreement reached late last year and underscores Japan's commitment to supporting Sri Lanka through its financial challenges.

Japan, in collaboration with France and India, holds a co-chair position on the committee representing 15 creditor nations, emphasizing the necessity for transparent and comparable agreements with creditors beyond the Official Creditor Committee (OCC).

Sri Lanka, grappling with its most severe financial crisis since gaining independence in 1948, is actively engaged in restructuring deals with creditors. The economic downturn, marked by soaring inflation, currency depreciation, and dwindling foreign reserves, led the country to default on foreign debt in May 2022.

The agreement in principle, announced in November, covers around $5.9 billion of outstanding public debt and incorporates a combination of extending maturity terms and reducing interest rates. This positive development signified progress in Sri Lanka's efforts to stabilize its economy.

However, challenges persist as China, Sri Lanka's primary bilateral creditor, has opted for an independent deal with the island nation and is not a formal member of the OCC. Sri Lanka's total external debt, estimated at $36.4 billion, includes $10.81 billion in bilateral debt, as reported by the finance ministry in September.

With a looming deadline, Sri Lanka must secure debt restructuring agreements with both bilateral creditors and bondholders, potentially by March. This timeline is crucial for the completion of the second review of a $2.9 billion bailout from the International Monetary Fund, which is integral to the nation's economic recovery.