Sri Lanka has stopped paying off its foreign debts for the time being. This was announced by the Ministry of Finance on Tuesday. The country is struggling with a shortage of foreign exchange reserves.
Sri Lanka wants to restructure its debt and in the meantime suspends all outstanding foreign currency payments to bondholders, bilateral creditors and institutional lenders. According to the Ministry of Finance, this is the “last resort” to avoid a further deterioration of the finances. Creditors can choose to capitalize the payments or be paid in Sri Lankan rupees, it says.
The government will accelerate bailout negotiations with the International Monetary Fund (IMF). That should avoid a final default. Sri Lanka has about 51 billion dollars (47 billion euros) in foreign debt. Interest payments of 36 million dollars and 42.2 million dollars (33 million euros and 38.8 million euros) on two bonds (with maturities until 2023 and 2028) are scheduled for April 18. On July 25, a government bond worth 1 billion dollars (920 million euros) expires.
The South Asian country is currently experiencing its worst economic crisis since its independence in 1948. The country has continued to protest rising costs, shortages of food, fuel and gas, and prolonged power cuts.
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