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Is Japan diluting Chinese influence by supporting Sri Lanka in its economic recovery?

Sri Lankan President Ranil Wickremesinghe's challenges continue on the economic front

Japan, one of the main creditors of Sri Lanka along with India and China, plans to organise a meeting of all creditors including international institutions to resolve Colombo’s financial crisis.

On Tuesday, Japanese Finance Minister Shunichi Suzuki told reporters: “We are concerned about Sri Lanka’s severe socio-economic situation. Japan wants to actively cooperate with other creditor countries and public organisations”. Suzuki added that Sri Lanka must accelerate talks with the International Monetary Fund (IMF) on a bailout, while all bilateral creditors, including China and India, must gather to discuss the issue.

India Narrative spoke with Dhananjay Tripathi, Associate Professor in the Department of International Relations at South Asian University, about Japan’s interest in resolving the island nation’s financial and humanitarian crisis.

Tripathi says that the initiative taken by Japan is a good sign and will help in Sri Lanka’s economic recovery, though a few sections will also look at Japan’s initiative from a geopolitical lens.

“I think Japan has now decided to take on China. Japan’s initiative regarding Sri Lanka is taking an interesting turn in world politics. It will help Sri Lanka as Japan is a power and is regarded as an ally by the rich Western countries. On the other hand, Japan is a credible voice in international organisations like the IMF and the World Bank (WB)”.

Tripathi adds that due to over-dependence on China and the politics played by the Rajapaksa family, the liberal West somehow ignored Sri Lanka.

“With Japan giving some kind of guarantee it will be easy for the rich countries to offer substantial help to Sri Lanka. Also, one thing is for sure – without the help of the West and international organisations, recovery for Sri Lanka will be difficult. Therefore, Japan’s coming forward to support Sri Lanka is significant”.

Sri Lankan newspaper Daily Mirror reported on Wednesday that President Ranil Wickremesinghe had told Reuters earlier this month that Sri Lanka would ask Japan to invite the main creditor nations to talks on restructuring bilateral debts.

Wickremesinghe also said that he would discuss the issue with Prime Minister Fumio Kishida in Tokyo in September.

In a significant statement, Japanese Foreign Minister Yoshimasa Hayashi said: “I believe it is important for the Sri Lankan Government to try to improve its economic and fiscal conditions in coordination with the IMF, Paris Club (of major creditor countries) and others, while maintaining transparency”.

Experts also say that while Japan is taking the lead in helping Sri Lanka out of the economic mess, how  will China act is a question mark. Beijing’s loans to countries are opaque and Sri Lanka’s financial woes also stem partly due to loans Colombo had taken during President Gotabaya Rajapaksa’s time for building mega infrastructure that have not delivered results or created employment.

Also, it is not known how will China react to Japan’s initiatives on resolving Sri Lanka’s financial problems.

Meanwhile, President Wickremesinghe met with an IMF team in Colombo to discuss a $3 billion aid support to bail out the country. Since the beginning of this year, the Indian Ocean island nation has been facing a humanitarian crisis of fuel and food shortages, a historical price rise and riots directed against the country’s politicians.

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