Colombo: Sri Lanka, the first Asian country to default on international loans this century, is currently facing a severe economic crisis that has left the government in a whirlpool of problems.
The people of Sri Lanka are deeply affected by the political and economic crisis and the central bank has also announced that for the first time in history the country has defaulted on its loans due to the worst political and economic situation.
Central Bank Governor Nandalal Veerasange said in a statement yesterday that the country could not pay interest on two sovereign bonds worth 3 63 million (7. 78 million) until Wednesday, despite a 30-day deadline.
According to the global credit rating agency Moody’s, Sri Lanka has become the first country in Asia in the current century to fail to meet such a deadline.
Speaking after the deadline for payments to international lenders passed, the central bank governor said: “Our position is very clear. [ہمارے قرضوں] If we do not reconfigure, we will not be able to pay, so this is what you call premature default.
“There may be technical definitions. For their part, they may consider us defaults. Our position is very clear. Until the loans are restructured, we will not be able to repay,” he said.
This comes as no surprise to analysts, as Sri Lanka announced last month that it would not repay its international debt due to its efforts to maintain its foreign exchange reserves due to the economic crisis.
Moody’s Investors Service also confirmed on Thursday that Sri Lanka had “defaulted on its international bonds for the first time”.
According to Moody’s, it expects an agreement between Sri Lanka and the International Monetary Fund (IMF) for a bailout package, but this could take several months. According to Moody’s, Pakistan was the last Asian country to default in 1999.
Another credit rating agency, Fitch Ratings, confirmed that Sri Lanka was a defaulter and reduced its assessment to a ‘limited default’.
Sri Lanka owes about ً 41 billion (51 51 billion) to international lenders. It also includes bilateral lenders China, Japan and India.
The country, which has been plagued by unrest and civil war for 30 years, began borrowing heavily in 2009 to develop infrastructure.
However, due to the global epidemic and its 2019 tax-cutting policy, tourist arrivals declined, which eventually led to a decline in foreign exchange and an increase in debt.
The country is now in the grip of the worst economic crisis in months, for the first time in 70 years. This has led to rising inflation, depreciation of foreign currency, severe shortages of food, medicine, oil and other essentials.
Due to the shortage of foreign currency, Sri Lanka is unable to import the goods on which it relies heavily.
The public outcry over the situation turned into a series of violent protests that led to the resignation of Prime Minister Mahinda Rajapaksa.
At least nine people have been killed in clashes, with more than 300 injured and scores detained in violent protests in the capital, Colombo.
Sri Lanka is in talks with the IMF to negotiate a bailout and debt restructuring with creditors. On Thursday, he said he expected an agreement on a possible loan program by Tuesday.
Sri Lanka has previously said it needs at least two to three billion pounds to overcome the ongoing crisis. Central Bank Governor Nandalal Veerasanghe warned that inflation, which is already very high, is set to rise further and will rise to around 40 per cent.
“Obviously, inflation is close to 30 percent,” he said. It will go even higher, in the next one or two months inflation will be close to 40%.