Sri Lanka

When Sri Lankan officials arrive in Washington this week to meet with the International Monetary Fund amid an economic and political crisis, the main question they’ll need to answer is how the country plans to manage its billions in debt, Bloomberg News reported. Sri Lanka is seeking up to $4 billion this year to help it import essentials and pay creditors. To get any of that through the IMF’s various programs, the government of President Gotabaya Rajapaksa must present a sustainable debt program.

Sri Lanka was downgraded deeper into junk by Fitch Ratings, which said the nation’s decision to suspend payments on its foreign debt has kicked off a sovereign default process, Bloomberg News reported. Fitch Ratings downgraded the nation’s long-term foreign currency to C, one step above default. Earlier, S&P also cut the country’s score to CC, the third-lowest level.

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, Bloomberg News reported. 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 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.

Sri Lanka’s politics have been dominated for much of the past two decades by a single family. Now a deepening economic crisis is threatening the Rajapaksa clan’s grip on power, the Wall Street Journal reported. Public dissent has been growing in the island nation of 22 million as energy shortages have led the country to resort to rolling blackouts and Sri Lankans have waited for hours in lines to obtain basic goods such as cooking gas and medicine. Dwindling foreign-currency reserves have left the country struggling to pay for imports and on the verge of a sovereign-debt default.

President Gotabaya Rajapaksa revoked emergency rule within days of imposing it as the escalating political crisis makes it tougher for Sri Lanka to agree a much-needed financial bailout from the International Monetary Fund, Bloomberg News reported. The proclamation that took effect April 1 is repealed as of midnight April 5, Rajapaksa said in an extraordinary gazette late Tuesday. Imposing Emergency had given Rajapaksa sweeping powers to detain protesters and seize property, but he also faced mounting calls from lawmakers to step down.

Sri Lanka will appoint a former central bank official in charge of foreign-exchange management as the new chief, who will be steering the nation through a severe shortage of dollars that is stoking inflation, fomenting street protests and roiling the government, Bloomberg News reported. P. Nandalal Weerasinghe expects to take over as Governor of the Central Bank of Sri Lanka April 7, he said by phone from Australia. The development was confirmed by the monetary authority’s spokeswoman.

Sri Lanka's government imposed a weekend curfew on Saturday, even as hundreds of lawyers urged President Gotabaya Rajapaksa to revoke a state of emergency introduced following unrest over fuel and other shortages in a deep economic crisis, Reuters reported. The government's information department said a countrywide curfew would run from 6 p.m. (1230 GMT) on Saturday to 6 a.m. (0030 GMT) on Monday. Rajapaksa introduced a state of emergency on Friday, raising fears of a crackdown on protests.

Sri Lanka will have to undergo debt restructuring as strongly suggested by the International Monetary Fund in order to secure financing from creditors, according to Citigroup Global Markets, Bloomberg News reported. The prescription follows IMF’s observation that fiscal consolidation efforts alone to pare debt to safe levels would be too large to be economically and politically feasible. While the IMF didn’t specify what a safe level is, Citi sees reduction to a 79.7% public debt ratio witnessed between 2010-18 as a good benchmark from 119% level last year.

An economic crisis is disrupting life across Sri Lanka, an island nation off India’s southern coast that only recently had been outperforming its neighbors, the New York Times reported. In less than a decade, Sri Lanka recovered from the ravages of a civil war that ended in 2009, soaring to the status of an upper-middle-income nation. It built a tourism-based economy that brought billions of dollars, many jobs and middle class comforts: high-end eateries and cafes, imported Jeeps and Audis, and upscale malls. Now, Sri Lankans just want the lights to stay on.

Sri Lanka’s painful decision to effectively devalue its currency this week could pave the way for the island nation to get help from the International Monetary Fund as a $1 billion debt payment looms in four months, Bloomberg News reported. The country’s dollar bonds due July 2022 gained 1.6% on Wednesday to halt five days of losses, while the rupee advanced 0.3% after plunging as much as 12% -- the most in more than four decades -- in reaction to the central bank’s announcement that it was letting the currency float as international reserves dwindle.