Sri Lanka to default on all foreign debt
The crisis-hit country announced it would stop payments on foreign debt as it needs its limited funds to purchase essential goods.
Sri Lanka has stated that it will suspend payments on its foreign debt in order to acquire food and gasoline using its limited dollar reserves.
Nandalal Weerasinghe, the new central bank governor, announced during a Tuesday briefing that "we have come to a situation where the ability to service our debt is very low. That’s why we decided to go for a preemptive default."
He added that payments on the South Asian country's foreign debt will be delayed "temporarily" until an International Monetary Fund (IMF) bailout.
Sri Lanka was required to repay $4 billion in foreign debt payments this year, including $1 billion in July, but its foreign reserves were only approximately $1.93 billion as of March.
See this: The Sri Lankan economic crisis
Weerasinghe explained that the country needs to "focus on essential imports and not have to worry about servicing external debt."
According to the Finance Ministry, Sri Lanka has found itself in such a severe condition as a result of the "effects of the Covid-19 outbreak and the fallout from the hostilities in Ukraine."
According to the ministry, the island nation's creditors, including foreign governments, were allowed to capitalize on any interest payments owed to them or choose for repayment in Sri Lankan rupees.
Days ago, doctors in Sri Lanka alerted about the worsening economic crisis which has caused life-saving medicines to almost run out, threatening a death toll that could be worse than the one during the COVID-19 pandemic.
The Sri Lanka Medical Association (SLMA) stated that the country's hospitals no longer have access to imported vital drugs and medical tools, which obliged several facilities to stop routine surgeries since the month of March, especially due to the lack of anesthetics. The SLMA added that even emergency surgeries may stop very soon.
Sri Lanka has been suffering its worst downturn since the island's independence in 1948. Weeks of power blackouts and critical shortages of food, pharmaceuticals, and fuel have brought the people to the streets.
All 24 ministers of Sri Lanka's cabinet resigned from their posts on April 3, while the President and his brother the Prime Minister stayed on, amid protests and clashes in the capital, Colombo.
As anger mounted in the South Asian nation, Sri Lanka instituted a social media blackout and curfew in order to quell protests, but people kept protesting, and authorities arrested 644 people who violated the curfew.
Sri Lanka has been facing a severe shortage of fuel, paper, and food, as well as record inflation rates.