Sri Lanka declares foreign debt default, calls for remittances

People line up in the sun to buy fuel in the Sri Lankan capital Colombo – Photo: REUTERS

In a press conference on the morning of April 12, local time, the governor of the Central Bank of Sri Lanka, Mr. P. Nandalal Weerasinghe, announced the suspension of foreign debt payments and interest (soft default), while avoiding hard default (ie no longer able to pay).

“The time has come when debt settlement becomes challenging and impossible. The best we can do is restructure debt to avoid a hard default,” Weerasinghe was quoted as saying by Reuters news agency.

The statement came as Sri Lanka prepared to discuss with the International Monetary Fund (IMF) to receive the bailout.

“The government has taken this emergency measure only as a last resort to prevent further deterioration of the country’s financial situation,” a statement from the Sri Lankan Finance Ministry explained.

The agency said creditors can choose to capitalize on interest payments by the afternoon of April 12 or payback in Sri Lankan rupees.

Sri Lanka currently has an external debt of 51 billion USD. The country must pay off $4 billion in foreign debt this year, including $1 billion in international government bonds maturing in July 2022. However, Sri Lanka’s foreign exchange reserves are only about 1.93 billion USD, as of the end of March 2022.

According to Mr. Weerasinghe, Sri Lanka’s funds will now be prioritized to import essential goods such as food, medicine, gasoline and gas. The Central Bank of Sri Lanka also urged people abroad to send money back home (remittances) through official channels to support the country.

Earlier, doctors warned that the health crisis could kill more people in Sri Lanka than COVID-19, as the country was about to run out of medicine and medical supplies.

The Indian Ocean island nation is experiencing its worst recession since independence in 1948. There are severe shortages of essential goods, soaring prices, chronic power cuts, and dwindling foreign exchange reserves. tap. But the country doesn’t have enough money… to buy anything from outside.

President Gotabaya Rajapaksa imposed a curfew and declared a state of emergency in early April in response to widespread unrest and the threat of protests that have continued since last week, including a brick hurling and burning of a bus in front of a bus. Presidential residence in Colombo.

Sri Lanka sinks deep into economic crisis

TTO – Sri Lanka is about to run out of medicine and medical equipment due to the ongoing serious economic crisis. Doctors warn the health crisis could kill more people in the country than COVID-19.