Sri Lanka Announces Default on External Debt
06:40 GMT 12.04.2022 (Updated: 07:14 GMT 12.04.2022)
The island country has been mired in a major economic and political crisis: last weekend, President Gotabaya Rajapaksa dissolved his entire Cabinet, except his brother, Prime Minister Mahinda Rajapaksa amid a nationwide wave of unrest.
Sri Lankan authorities on Tuesday announced that the nation would default on its $51 billion external debt pending a bailout from the International Monetary Fund.
Previously, Central Bank Governor P. Nandalal Weerasinghe said that the country will temporarily suspend foreign debt payments to avoid a hard default, as reserves are required for essential imports.
"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", he said.
© REUTERS / Dinuka LiyanawatteNandalal Weerasinghe, newly appointed Governor of the Central Bank of Sri Lanka, speaks during a news conference, amid the country's economic crisis in Colombo, Sri Lanka, 8 April 2022.
Nandalal Weerasinghe, newly appointed Governor of the Central Bank of Sri Lanka, speaks during a news conference, amid the country's economic crisis in Colombo, Sri Lanka, 8 April 2022.
© REUTERS / Dinuka Liyanawatte
The governor also expressed hope to reach consensus with the creditors, noting that development bonds will be held separately and will not be restructured.
The current crisis was triggered, among other things, by a low flow of tourists amid the pandemic. As a result of fuel shortages, prolonged power cuts in some parts of the country are lasting up to 13 hours.