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Sunday, August 14 2022

Sri Lanka warns it will default on foreign debt amid crisis

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Colombo: Sri Lanka has said it will temporarily default on its foreign debts amid its worst economic crisis in over 70 years, BBC reported.

Officials said the impact of the Covid-19 pandemic and the Russia-Ukraine war made it “impossible” for the island nation to pay its creditors.

Sri Lanka has been witnessing mass protests as it suffers food shortage, soaring prices and power outage.

The country is due to start talks with the International Monetary Fund (IMF) next week on a loan programme to get its economy back on track.

Sri Lanka’s Finance Ministry said it otherwise had an “unblemished record” of paying its dues since independence from the UK in 1948.

“Recent events, however, have eroded Sri Lanka’s fiscal position, due to which continued normal servicing of external public debt obligations is becoming impossible,” it said.

The IMF had assessed Sri Lanka’s debt to be unsustainable last month, the ministry noted.

“Although the government has taken extraordinary steps in an effort to remain current on all of its external indebtedness, it is now clear that this is no longer a tenable policy. A comprehensive restructuring of these obligations will be required,” it added.

In recent weeks, demonstrators have taken to the streets of Colombo as homes and businesses have been hit with long power cuts.

Sri Lankans are faced with shortages and rising inflation after the country steeply devalued its currency last month ahead of talks with the IMF over a bailout, BBC reported.

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