Sri Lanka will temporarily suspend foreign debt payments to avoid a hard default, the central bank governor said, with its limited foreign reserves required for imports of essential items such as fuel.
Sri Lanka is due to start talks with the International Monetary Fund (IMF) on a loan programme next week, with the country suffering from prolonged power cuts alongside shortages of food and medicines.
The island nation’s foreign reserves stood at a paltry $1.93 billion at the end of March, with foreign debt payments of around $4 billion due this year, including a $1 billion international sovereign bond maturing in July.
The governor said the action was being taken in good faith, emphasizing that the country of 22 million people had never defaulted on its debt payments.
J.P. Morgan analysts estimate Sri Lanka’s gross debt servicing would amount to $7 billion in 2022 and a current account deficit of around $3 billion.
Source: www.reuters.com
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