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Sri Lanka announces default on all external debt
The finance ministry said creditors, including foreign governments that had lent to the South Asian nation, were free to capitalise any interest payments due to them from Tuesday afternoon or opt for payback in Sri Lankan rupees.
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People queue to buy Liquefied Petroleum Gas (LPG) cylinders in Colombo on April 11, 2022.
(AFP/Ishara S. KODIKARA )
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risis-stricken Sri Lanka Tuesday announced it would default on its $51 billion external debt pending a bailout from the International Monetary Fund.
The finance ministry said creditors, including foreign governments that had lent to the South Asian nation, were free to capitalise any interest payments due to them from Tuesday afternoon or opt for payback in Sri Lankan rupees.
Reuters reported that Sri Lankan officials on Tuesday said that the crisis-hit country will temporarily suspend foreign debt payments to avoid a hard default, with its limited foreign reserves required for imports of essential items such as fuel.
"It has come to a point that making debt payments are challenging and impossible. The best action that can be taken is to restructure debt and avoid a hard default," Central Bank Governor P. Nandalal Weerasinghe told reporters.
On Monday, three political parties that recently withdrew from Sri Lanka's ruling coalition have proposed forming an interim government with a new prime minister replacing President Gotabaya Rajapaksa's older brother.
Facing an economic crisis and dragged down by debt, the island nation of 22 million people is running short of power, fuel, food and medicines due to a lack of foreign exchange for imports. It has reached out to the International Monetary Fund (IMF) and countries such as India and China for urgent financial help.
Prime Minister Mahinda Rajapaksa called for patience and announced the reinstatement of a critical fertiliser subsidy for farmers.
"The president and I are spending every moment to formulate solutions on how to get Sri Lanka out of this current crisis," he said in a televised address, as protesters camped outside the president's office for the third consecutive day.
President Rajapaksa dissolved his cabinet last week and called for a unity government to help tackle the crisis, as 41 lawmakers walked out of the ruling coalition to become independents in the 225-seat parliament. The government has said it retains a majority in the house.
Three parties represented by 16 of the lawmakers told reporters that they had met the president and the prime minister and that more talks were scheduled for Tuesday.
"The main proposal is to have an all-party committee to make key decisions and the appointment of a new prime minister and a limited Cabinet," said Udaya Gammanpila, chief of the Jathika Hela Urumaya party.
"We want this before a new election. We have to reverse shortages and stabilise the economy."
