Sri Lanka announces default on its external debt

The Sri Lankan Ministry of Finance announced on Tuesday that the country will default on its external debt, pending a bailout by the International Monetary Fund (IMF).

Debt repayments would be restructured in a manner consistent with an economic adjustment program supported by the IMF, which will apply to all debt repayments, the ministry said in a statement.

Creditors, including foreign governments that had lent to the South Asian nation, are free to capitalize any interest payments due to them from Tuesday afternoon, or opt for payback in Sri Lankan rupees, said the statement.

However, it said credit facilities and any amounts disbursed under existing credit facilities are not subject to this policy and shall be serviced normally.

"The government is taking the emergency measure only as a last resort in order to prevent further deterioration of the republic's financial position and to ensure fair and equitable treatment of all creditors," the statement said.

Sri Lanka is presently in the midst of a severe economic crisis featuring shortages of foreign exchange, fuel and other essential supplies as well as rising inflation.

On April 5, the U.S. dollar reached over 300 against the Sri Lankan rupee for the first time.

(Xinhua)