PROTESTERS take part in a demonstration at the entrance of the president’s office in Colombo on Tuesday.—AFP
PROTESTERS take part in a demonstration at the entrance of the president’s office in Colombo on Tuesday.—AFP

COLOMBO: Sri Lanka announced a default on its $51 billion foreign debt on Tuesday as the island nation grapples with its worst economic crisis in memory and escalating protests demanding the government’s resignation.

Acute food and fuel shortages, as well as long daily electricity blackouts, have brought widespread suffering to the country’s 22 million people in its most painful downturn since independence in 1948.

The government has struggled to service foreign loans and Tuesday’s decision comes ahead of negotiations for an International Monetary Fund bailout aimed at preventing a more catastrophic hard default that would see Sri Lanka completely repudiate its debts.

“We have lost the ability to repay foreign debt,” Sri Lanka’s Central Bank governor Nandalal Weerasinghe told reporters in Colombo.

“This is a pre-emptive negotiated default. We have announced (it) to the creditors.” Officials say the move will free up foreign currency to finance desperately needed food, fuel and medicine imports after months of scarce supplies.

Just under half of Sri Lanka’s debt is market borrowings through international sovereign bonds, including one worth $1 billion that was maturing on July 25.

China is Sri Lanka’s largest bilateral lender and owns about 10 per cent of the island’s foreign debt, followed by Japan and India.

The government has borrowed heavily from Beijing since 2005 for infrastructure projects, many of which became white elephants.

Sri Lanka also leased its strategic Hambantota port to a Chinese company in 2017 after it became unable to service the $1.4 billion debt from Beijing used to build it.

This sparked concerns from Western countries and neighbour India that the strategically located South Asian nation was falling victim to a debt trap.

Chinese foreign ministry spokesman Zhao Lijian said the Tuesday’s default would not stop Beijing from lending support to Sri Lanka’s beleaguered economy.

“China has always done its best in providing assistance to Sri Lanka’s economic and social development. We will continue to do so in the future,” he said.

Sri Lanka’s snowballing economic crisis began to be felt after the coronavirus pandemic torpedoed vital revenue from tourism and remittances.

The government imposed a wide import ban to conserve dwindling foreign currency reserves and use them to service the debts it has now defaulted on.

But the resulting shortages have stoked public anger. At least eight people have died while waiting in fuel queues since March 20, with two of the deaths reported on Monday.

Published in Dawn, April 13th, 2022

Opinion

Editorial

Judiciary’s SOS
Updated 28 Mar, 2024

Judiciary’s SOS

The ball is now in CJP Isa’s court, and he will feel pressure to take action.
Data protection
28 Mar, 2024

Data protection

WHAT do we want? Data protection laws. When do we want them? Immediately. Without delay, if we are to prevent ...
Selling humans
28 Mar, 2024

Selling humans

HUMAN traders feed off economic distress; they peddle promises of a better life to the impoverished who, mired in...
New terror wave
Updated 27 Mar, 2024

New terror wave

The time has come for decisive government action against militancy.
Development costs
27 Mar, 2024

Development costs

A HEFTY escalation of 30pc in the cost of ongoing federal development schemes is one of the many decisions where the...
Aitchison controversy
Updated 27 Mar, 2024

Aitchison controversy

It is hoped that higher authorities realise that politics and nepotism have no place in schools.