Sri Lanka defaults international bond payment
View(s):Sri Lanka on Wednesday defaulted on its international bonds for the first time, after failing to make its coupon payments that were due on April 18 within the 30-day grace period.
In the meantime Fitch Ratings said it has downgraded Sri Lanka’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘RD’ (restricted default) from ‘C’.
In a separate statement, Moody’s rating agency said they expected the default given that the government had announced that it would suspend external debt-service payments as of April 12 and pursue comprehensive external public debt restructuring in coordination with a potential International Monetary Fund (IMF) programme.
“For Sri Lanka, our weak recovery assumptions are driven by the sovereign’s very low foreign exchange reserve adequacy and the government’s very weak debt affordability,” it said.
Sri Lanka’s foreign exchange reserves excluding gold and special drawing rights stood at US$1.6 billion at the end of April 2022, sufficient to cover less than a one month of imports and far below the government’s external debt repayments of $4.0-$6.5 billion per year (excluding foreign-currency repayments on Sri Lanka Development Bonds and to Foreign Currency Banking Units) through at least 2025.
Without a large external financing envelope from development partners including the IMF, and in the context of a widening current account deficit because of higher global energy and food prices, Sri Lanka’s external position will remain very precarious even with the suspension of external public debt servicing, Moody’s said.
“We assume that Sri Lanka will eventually reach an agreement with the IMF for a funded programme. However, finalising the programme will likely take several months given the need for staff level agreement on both sides, followed by parliamentary approval in Sri Lanka and approval by the IMF’s executive board,” the Moody’s statement said.
The ongoing political and social unrest in Sri Lanka may slow the pace of negotiations, given the potential for changes in the political leadership or government.
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!