US defers Sri Lanka's $40m debt repayment, freeing tsunami funds

[TamilNet, Friday, 30 September 2005, 10:41 GMT]
U.S. Ambassador Jeffrey Lunstead and Sri Lankan Treasury Secretary Dr. P.B. Jayasundera signed an agreement Friday allowing 2005 funds previously allocated for debt payments, for a total value of $40m, to be used for relief and reconstruction activities in tsunami affected areas, a press release issued by the US embassy in Colombo said, Friday.

Full text of the press release follows:

The United States has reached an agreement with Sri Lanka to restructure its bilateral debt with the U.S., thereby freeing up millions of dollars for tsunami reconstruction projects. In a signing ceremony held today, September 30, at the Ministry of Finance and Planning, U.S. Ambassador Jeffrey Lunstead and Sri Lankan Treasury Secretary Dr. P.B. Jayasundera sealed the agreement allowing 2005 funds previously allocated for debt payments to be used for relief and reconstruction activities in tsunami affected areas.

The value of the total debt deferred is US$40 million. This one year restructuring will free this amount for tsunami relief and reconstruction activities. The U.S. debt treated by this agreement is held by the U.S. Department of Agriculture (USDA) and the U.S. Agency for International Development (USAID).

The agreement follows the framework laid down in Sri Lanka's agreement with the Paris Club, signed on June 15, 2005. The deferral is for one year. Repayment will be in seven equal, semi-annual installments, the first on Dec. 1, 2006 and the last on Dec. 1, 2009.

U.S. Ambassador to Sri Lanka Jeffrey J. Lunstead commented: "This agreement will provide additional flexibility and liquidity for the Government as it continues to meet the needs of those citizens adversely affected by last year's tsunami. This is one more example of America's efforts to help the people of Sri Lanka rebuild their lives following the tragic events of December 26th."

In addition to this debt restructuring, the US has also extended the following assistance:

-- USAID provided US$ 58 million in immediate relief assistance in the days and weeks following the tsunami;

-- USAID will provide US$ 33 million in large-scale infrastructure assistance. This project will be conducted in three phases. First, USAID will build a new 700 meter bridge over Arugam Bay, improve water and sanitation facilities in the surrounding Pottuvil area, and consult with communities on tourism development. Second, USAID will rebuild up to 14 vocational educational facilities, including two "model schools", and provide equipment and technical assistance with curriculum design. Finally, USAID will work closely with communities to rebuild and upgrade fisheries in Dondra, Hikkaduwa and Mirissa.

-- The U.S. Trade and Development Agency (USTDA) will provide US$ 2,095,000, through five separate grants, for tsunami-related reconstruction efforts related to emergency communications, water and transportation in Sri Lanka.

-- The U.S. Peace Corps, through its Crisis Corps Volunteer Program, has provided 25 volunteers to assist local and international NGOs and increase capacity for dealing with tsunami relief and reconstruction activities.