The Government does not foresee any complications with the ongoing Japan International Cooperation Agency (JICA) projects in the country despite Japan’s recession, The Sunday Morning learns.
Speaking to The Sunday Morning, Treasury Deputy Secretary R.M.P. Rathnayake said that although JICA-funded projects had been currently suspended following Sri Lanka’s debt default, Japan had expressed its willingness to disburse the funds for ongoing JICA projects following an early completion of signing of a Memorandum of Understanding (MoU) on debt restructuring between the Official Creditor Committee (OCC) and the Sri Lankan Government.
“JICA-funded projects are presently held up, but we have tried to facilitate them as much as possible by providing Government funds for them to continue without major disruptions. However, we recently had a positive discussion with the Japanese authorities and the JICA President in Colombo, where they assured us that they will be able to positively consider the resumption of projects that have been halted as soon as the MoU on debt restructuring is signed.”
Rathnayake further said that Japanese authorities had not communicated any concerns regarding the projects in relation to the economic downturn: “In bilateral discussions, we haven’t discussed any recession-related issue with Japan and they haven’t indicated difficulties with funding for the ongoing projects either, so we will be going ahead as agreed.”
JICA has implemented a wide range of projects across Sri Lanka, including strengthening infrastructure, expanding social services, developing human resources and rural communities, enhancing small and medium-scale enterprises, and launching disaster management and climate change initiatives.
JICA President Dr. Akihiko Tanaka, who was recently in Sri Lanka on an official visit, said that JICA would continue to assist the development and reform agenda of Sri Lanka. Meanwhile, he also expressed support for the continuation of the project for the second terminal at the Bandaranaike International Airport (BIA), subject to completion of debt restructuring.
The project, initially launched in 2020 with a JICA soft loan of Rs. 145 billion, was halted in March 2022 with Sri Lanka defaulting on its debt.
Ministry of Ports, Shipping, and Aviation Secretary K.D.S. Ruwanchandra confirmed to The Sunday Morning that Japan’s recession would have no impact on the funding of JICA projects in Sri Lanka since these projects were previous commitments, adding that project funding would resume soon after the completion of debt restructuring.
Further, Minister of Water Supply and Estate Infrastructure Development Jeevan Thondaman asserted to The Sunday Morning that the Anuradhapura North Water Supply Project, led by the Ministry of Water Supply and Estate Infrastructure Development with financial backing from JICA, would also be unaffected by Japan’s economic situation.
“What must be taken into account is that there is a global economic crisis going on. There are very few countries which have a 0% chance of recession. If you look at Japan, this is one of those rare instances where they are facing such an issue, but that will not have any impact on investments, because this is a commitment that has already been made. Nearly Yen 5,000 million has been used for this project and we have managed to complete it.”
“Even if a donor country is going through a recession, if they are doing an investment with due diligence in Sri Lanka, then they would want to see results,” he stressed, noting that Japan was focused on seeing the results of the water supply scheme, which was intended to reduce Chronic Kidney Disease of Unknown origin (CKDu) among people.
Japan has now lost its position as the world’s third-largest economy to Germany, slipping into a recession after the country’s economy shrank for two successive quarters. Reports note that two quarters in a row of economic contraction are typically considered the definition of a technical recession, with latest data showing Japan’s GDP contracting by 0.4% in October to December 2023 and by 2.9% in July-September 2023, compared to a year earlier.