Japan says no pact yet with Sri Lanka on debt restructure talks

TOKYO (Reuters) -Japan has not yet reached an agreement to co-chair a debt summit with Sri Lanka’s creditors, a government official in Tokyo said on Thursday, as the island nation struggles to find a way out of a crippling economic crisis.

Sri Lanka has to renegotiate around $30 billion of foreign debt, including with bilateral creditors such as China, Japan and India, with one of them likely to co-chair the talks.

“We have not reached such an agreement. It might be their wishful thinking but the situation remains unchanged,” a senior Japanese government official with knowledge of the matter told Reuters on condition of anonymity.

The denial from Tokyo came after less than an hour after Sri Lankan President Ranil Wickremesinghe’s office said on Thursday that Japan had agreed to co-chair the meeting with negotiators.

Wickremesinghe’s office later issued a clarification saying Sri Lanka had requested Japan to co-chair the summit. Japan would also help Sri Lanka in its credit restructuring process, Wickremesinghe’s office said.

“Japan will stand ready to provide full support for Sri Lanka’s debt restructuring providing that necessary conditions are met,” the Japanese government official said.

Sri Lanka is facing its worst economic crisis in decades, with severely depleted foreign exchanges reserves leading to prolonged shortages of essentials, including fuel and food.

Out of Sri Lanka’s total bilateral debt of $10 billion, Japan holds around $3.5 billion worth, amounting to 4.4% of Sri Lanka’s GDP, according to government and IMF data.

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