COLOMBO: As a “last option,” crisis-stricken Sri Lanka defaulted on its $51 billion external debt on Tuesday after running out of foreign cash to gain critically needed supplies.
This is the greatest economic depression the island nation has seen since independence, with frequent blackouts and severe food and fuel shortages.
Sri Lanka’s finance ministry said in a statement that any interest payments owed by creditors, including foreign governments, might be capitalised or paid in Sri Lankan rupees.
Only as a last resort, the administration has implemented the emergency measure, according to the statement.
To guarantee “fair and equitable treatment of all creditors” ahead of an IMF-assisted recovery programme for the South Asian nation, the immediate default on debt was mandated.
Many of Sri Lanka’s 22 million residents are suffering, and the situation has sparked weeks of anti-government demonstrations.
Last year, international rating agencies downgraded Sri Lanka, thus preventing the country from accessing global financial markets to borrow much-needed loans to fund imports.
Both India and China offered Sri Lanka greater credit lines to buy goods from them instead of debt relief.
