Sri Lanka will default on debt, no money for fuel, the minister said

Two of Sri Lanka’s sovereign bonds are expected to be placed in default by rating agencies on Wednesday after non-payment of coupons, while the energy minister said the country had run out of money to pay for fuel.

Two of Sri Lanka’s sovereign bonds are expected to be placed in default by rating agencies on Wednesday after non-payment of coupons, while the energy minister said the country had run out of money to pay for fuel.

The economic crisis unprecedented in the country’s history since independence in 1948 has led to a severe foreign exchange deficit, which led to the recall of two coupon payments on sovereign bonds on 18 April.

Sri Lanka has already said it is unable to make coupon payments, and the 30-day grace period ends on Wednesday.

S&P has said that the rating of bonds maturing in 2023 and 2028 has already been ‘defaulted’ and the country’s overall rating may be downgraded to ‘D’ if the non-payment is confirmed after the grace period ends. .

Sri Lanka currently has no dollars to pay for petrol shipments, Electricity and Energy Minister Kanchana Wijesekera told parliament, urging people to stop queuing for the next two days.

There is a petrol shipment at Colombo port since March 28, but the government is unable to pay, he said.

“There are not enough dollars available to open letters of credit,” he said.

“We are working to find funds but petrol will not be available until at least the weekend. A very small reserve stock of petrol is being released for essential services like ambulances,” he said.

Prime Minister Ranil Wickremesinghe said on Wednesday that the country had received $160 million in bridge financing from the World Bank, but it was unclear whether the money could be used for fuel payments.

“The figures are messed up,” he said. “But the reality is we don’t even have $1 million.”

Hard-hit by the pandemic, rising oil prices and populist tax cuts, Sri Lanka’s dire economic situation has led to rising inflation and lack of essential supplies, with thousands taking to the streets to protest.

Nine people were killed and more than 300 injured in last week’s violence between pro-government and anti-government factions and police, and followed the resignation of former prime minister Mahinda Rajapaksa.

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