Sri Lanka is suspending its repayment of foreign debt, including bonds and government-to-government borrowings, pending the completion of a loan restructuring program with the International Monetary Fund to deal with the island nation’s worst economic crisis in decades, the government said Tuesday.
Sri Lankans for the past months have been enduring shortages of fuel, food and other essentials and daily power outages. Most of those items are paid for in hard currency, but Sri Lanka is on the brink of bankruptcy, saddled with dwindling foreign reserves and $25 billion in foreign debt. Nearly $7 billion is due this year.
“Sri Lanka has had an unblemished record of external debt service since independence in 1948,” the Ministry of Finance said in a statement. “Recent events, however, including the effects of the COVID-19 pandemic and the fallout from the hostilities in Ukraine, have so eroded Sri Lanka’s fiscal position that continued normal servicing of external public debt obligations has become impossible.”
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