Sri Lanka defaults on debts for first time

Sri Lanka defaults on debts for first time

Sri Lanka has defaulted on its debts for the first time in its history as it struggles with an economic and political crisis triggered by global shock waves from the pandemic and the war in Ukraine.

An inflation rate spiralling towards 40%, shortages of food, fuel and medicines and rolling power blackouts have led to nationwide protests and a plunging currency, with the government short of the foreign currency reserves it needed to pay for imports.

The Sri Lankan central bank governor said on Thursday that the oldest democracy in Asia had fallen into a “pre-emptive default” on its debts after the expiry of a 30-day grace period for missed interest payments on two of its sovereign bonds. It is the first default by an Asia-Pacific nation this century, according to the credit rating agency Moody’s.