The Sri Lankan finance ministry in a statement released on Wednesday said that the nation has defaulted on its $51 billion external debt. The finance ministry said that the move was a last resort after Sri Lanka ran out of foreign exchange to import essential items.
Sri Lanka said that foreign governments and creditors to whom the nation owes money are free to capitalise any interest payments due to them from Tuesday and can also opt for paying back the dues in Sri Lankan currency.
“The Government is taking the emergency measures described in this memorandum only as a last resort in order to prevent a further deterioration of the Republic’s financial position and to ensure fair and equitable treatment of all creditors — commercial and bilateral — in the comprehensive debt restructuring that now seems inescapable,” the statement said. The statement comes ahead of the International Monetary Fund assisted recovery programme for the South Asian nation.
“The Government intends these emergency measures as temporary expedients designed to preserve the financial status quo until, with the assistance of the IMF and Sri Lanka’s other official sector partners, a full economic recovery program can be prepared,” the statement further added.
The finance ministry said that the government will update on their website all the Debt Sustainability Analyses and other such assessments prepared by the staff of the IMF and also by Sri Lanka’s own financial advisors. It also said that Sri Lanka will discuss with bilateral and commercial creditors regarding the features of a comprehensive external debt restructuring program.
Sri Lanka grapples with unrest as 22 million people demand the resignation of president Gotabaya Rajapaksa and the entire cabinet. Protests continue in Colombo’s streets and in other cities.
The World Bank announced that it is releasing an immediate grant of $10 million to Sri Lanka so that it can purchase emergency drugs on Tuesday. Meanwhile fresh consignment of 10,000 metric tons of rice from India was also delivered to Sri Lanka on the same day. India earlier sent 16,000 metric tonnes of rice earlier last week to help the nation feed its people. The consignment arrived before the Sinhalese New Year celebrations which are expected to be muted due to the ongoing crisis in the country.
(with inputs from AFP)
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