Colombo, Apr 19: According to a leading credit rating agency Sri Lanka is all set to see “a series of defaults” after it said it would suspend foreign debt interest payments, BBC reported on Tuesday.
Moody’s recently downgraded its assessment of bonds sold by Sri Lanka.
On Monday, Sri Lanka’s Finance Ministry confirmed that it would miss debt interest payments to the tune of $78m (?60m).
Last week, the Sri Lankan Government said it would temporarily default on $35.5bn in foreign debt as the pandemic and the war in Ukraine made it “impossible” to make payments to overseas creditors. If the overdue interest rate payments are not made within a 30-day grace period, it would mark the Sri Lanka’s first default on its foreign debt since its independence in 1948.
Sri Lanka which is facing its worst economic crisis ever since its independence this week started talks with the International Monetary Fund (IMF).
According to reports the IMF held the initial view that a request for an Rapid Financing Instrument (RFI), or emergency funding, “doesn’t meet their criteria”.
“However, it said that India subsequently made representations on an RFI for SL [Sri Lanka] as well and IMF may consider this request due to the unique circumstances,”.
A RFI is usually granted to member nations with “urgent” funding needs, because of sharp commodity price rises, natural disasters or conflicts. It doesn’t require countries to have a plan to improve their circumstances.
An Extended Fund Facility requires a country to make commitments with “a strong focus on structural reforms to address institutional or economic weaknesses”.
(UNI)
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