The Sri Lankan government has announced that it will stop paying some external debts and aim to restructure its debts. The country is suffering from a decline in foreign exchange reserves.
The Ministry of Finance of the country announced on the 12thstatementAnnounced that it will temporarily suspend payments to bondholders, bilateral creditors and institutional investors. It was positioned as a last resort to stop further deterioration of public finances. He also explained that he would hurry to discuss with the International Monetary Fund (IMF) and said he would like to avoid hard defaults (default), which has a great impact on the economy.
At a press conference, the new governor of the central bank, Weerashinha, said he was aiming to consult with creditors and warned of the possibility of default.
According to Bloomberg data, the Sri Lankan government will pay $ 36 million worth of 2023 redemption bonds and $ 42.2 million of 28-year redemption bonds on the 18th of this month. In addition, $ 1 billion worth of government bonds have a maturity date of July 25.
Following this announcement, the president and the Rajapaksa brothers, who are prime ministers, may be under increasing pressure to resign. Inflation has reached 20% in the country, electricity shortages are serious, and public protests are widespread. The party to which the president belongs has lost a majority of seats in parliament, and talks with the IMF are likely to be delayed.
“We expected the market to default,” said Karl Wong, head of fixed income at Avenue Asset Management. “We need to keep an eye on how the new cabinet will respond to this turmoil and negotiate with the IMF.” .. The company says it has reduced its holdings of Sri Lankan bonds to zero.
Original title:Sri Lanka Will Default on Foreign Debt to Save Dollars for Food、Sri Lanka to Stop Some Foreign Debt Payments, Government Says、Sri Lanka Default Looms as Debt Payments Halted to Save Dollars(excerpt)
(We will update the 5th and 6th paragraphs with background and investor comments.)