Sri Lanka says will default on all external debt to pay for food

All outstanding payments to bond holders, bilateral creditors and institutional lenders will be suspended until a debt restructure, Lanka's finance ministry said

Sri Lanka warned of an unprecedented default and halted payments on foreign debt, an extraordinary step taken to preserve its dwindling dollar stockpile for essential food and fuel imports.
 
All outstanding payments to bond holders, bilateral creditors and institutional lenders will be suspended until a debt restructure, the finance ministry said in a statement on Tuesday. The newly appointed central bank governor, Nandalal Weerasinghe, said in a briefing that authorities are seeking to negotiate with creditors and warning of a possible default.
 
The measures are “a last resort in order to prevent a further deterioration of the Republic’s financial position,” the finance ministry said. “It is now apparent that any further delay risks inflicting permanent damage on Sri Lanka’s economy and causing potentially irreversible prejudice to the holders of the country’s external public debts.”
 
The announcement follows mounting calls for President Gotabaya Rajapaksa and his brother, Prime Minister Mahinda Rajapaksa, to resign. They have been defiant so far — Gotabaya called for “unity and better understanding” on Tuesday while greeting citizens for the Sinhala and Tamil New Year festival — despite protests against inflation that’s running at 20 per cent and daily electricity cuts of as long as 13 hours. His party has lost its majority in parliament and bailout talks with the International Monetary Fund are set to be further delayed.
 
The government will expedite talks with the IMF, the finance ministry said on Tuesday, adding that it wants to avoid a hard default. Rajapaksa’s administration is also seeking aid from nations including India and China, which is one of its biggest creditors.
 
Sri Lanka’s dollar bonds due July 2022 fell 1.8 cents on the dollar on Tuesday to a fresh record low 46.07 cents. The rupee lost 0.5 per cent.