Foreign Exchange Ludes, Sri Lanka Failed to Pay All Foreign Debts Worth 732 Trillion

COLOMBO, KOMPAS.com – Sri Lanka, which is being hit by a crisis, failed to pay its foreign debts worth US$51 billion or Rp. 732 trillion on Tuesday (12/4/2022).

The government calls it a “last resort” after running out of foreign exchange to import much-needed goods.

Reported Gulf NewsThe island nation is grappling with its worst economic slump since independence, with regular power outages and acute shortages of food and fuel.

Also read: Sri Lankan doctors forced to work without electricity and medicine due to crisis: like a nightmare

Sri Lanka’s finance ministry said in a statement that creditors, including foreign governments, were free to take advantage of interest payments due to them from Tuesday or choose repayments in Sri Lankan rupees.

“The government is taking emergency measures only as a last resort to prevent further deterioration of the republic’s financial position,” the statement said.

Sri Lankan dollar bonds maturing in July 2022 fell 1.8 cents against the dollar on Tuesday to a new record low of 46.07 cents. While the Rupiah weakened 0.5 percent.

The nation’s stock market was closed this week for a public holiday after trading for shortened hours due to daily blackouts.

Sri Lanka’s foreign exchange reserves slumped 16 percent to 1.94 billion US dollars last month.

Also read: Sri Lanka Update: Post-wave of Protests, Parliament to Hold Government Destiny Meeting

The government will make interest payments of $36 million on the 2023 dollar bond on April 18, as well as $42.2 million on the 2028 note, according to data compiled by Bloomberg. Meanwhile, state bonds worth 1 billion US dollars will mature on July 25.

The crisis itself has caused widespread misery for Sri Lanka’s 22 million people and led to weeks of anti-government protests.

International rating agencies downgraded Sri Lanka last year, effectively blocking the country from accessing foreign capital markets to raise much-needed borrowing to finance imports.

Also read: All Sri Lankan Ministers Resign After Protests Break Out Nationwide

Sri Lanka has sought debt relief from India and China, but both countries have instead offered more lines of credit to buy commodities from them.

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