Sri Lanka defaults on $51 billion external debt

The Sri Lanka government has announced that it has defaulted on its $51 billion external debt on Tuesday. The economic crisis-hit country has called the debt a “last resort” after running out of foreign exchange to import urgently required goods.

In a statement, Sri Lanka’s finance ministry said that creditors including foreign governments can capitalize any interest payments due to them from Tuesday or choose for payback in Sri Lankan rupees.

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

The ministry said that the debt default has been announced to ensure “fair and equitable treatment of all creditors” before help reaches Sri Lanka in form of the International Monetary Fund assisted recovery programme.

The island nation is in the midst of the worst economic crisis since its independence which has triggered regular blackouts and shortage of food and fuel among other essentials, affecting its 22 million population. The crisis has led to widespread protests across the country, with the public taking to the roads and demanding an ouster of Rajapaksa family from the government.

Amid the turmoil, the government has approached the International Monetary Fund (IMF) and neighbours like India and China for urgent financial help to help it finance its imports. Both India and China, however, have offered more credit lines to buy commodities from them.