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| Protesters take part in a demonstration against the economic crisis at the entrance of the president's office in Colombo, Sri Lanka, Tuesday. AFP-Yonhap |
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."
The ministry said the IMF has assessed Sri Lanka's foreign debt as unsustainable, and staying current on foreign debt repayment is no longer a tenable policy.
In addition to seeking help from the IMF, the government has turned to India and China for help in dealing with the shortages.
"The government intends to pursue its discussions with the IMF as expeditiously as possible with a view to formulating and presenting to the country's creditors a comprehensive plan for restoring Sri Lanka's external public debt to a fully sustainable position," the ministry said.
Meanwhile, protesters camped out around the president's office for a fourth day demanding the resignation of President Gotabaya Rajapaksa, holding him responsible for the economic crisis. Supporters of the protesters supplied drinking water and food, and Muslim protesters broke their Ramadan fasting at the site to share food with those around them. (AP)
