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Sri Lanka defaults on external debt, lets creditors capitalise interest payments

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Colombo: With the condition of its economy deteriorating, Sri Lanka said it was defaulting on all external debt. It has said that its creditors were free to capitalise the interest payments due to them.

The government has called it a last resort.

In a statement, the finance ministry said that the creditors, including foreign governments, were free to capitalise any interest payments due to them from Tuesday. Alternatively, they could opt for payback in Sri Lankan rupees.

“The policy… shall apply to amounts of Affected Debts outstanding on April 12, 2022,” the statement read.

“The Government is taking the emergency measures… 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…” it added.

The island nation has run out of foreign exchange required to import goods. It is currently facing its worst ever economic crisis, struggling with shortage of food and fuel.

India has extended a credit line to its neighbour and has been sending rice to help ease food crisis. On Tuesday, the Indian embassy said that additional 11,000 MT of rice from India had reached Colombo.

 

 

 

 

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