Sri Lanka is expected to be in default on Wednesday after the non-payment of coupons on two of its sovereign bonds.
The grace period for interest payments on two $1.25 billion international sovereign bonds maturing in 2023 and 2028 will end on Wednesday, triggering cross-default clauses.
Ratings agency S&P Global said the ratings on the bonds, maturing in 2023 and 2028, have already been cut to “default” and the country’s overall rating could be further cut on confirmation of the non-payment.
Sri Lanka currently has no dollars to pay for petrol shipments, Power and Energy Minister Kanchana Wijesekera told parliament.
A fuel delivery has been stranded at Colombo port since March 28 because the government has been unable to pay, he added. “There aren’t enough dollars available to open letters of credit,” he said.
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Prime Minister Ranil Wickremesinghe said on Wednesday the country had secured $160 million in bridge financing from the World Bank, but it was not clear if the funds could be used for fuel payments.
“The reality is we don’t even have $1 million,” Wickremesinghe said.
Hit hard by the pandemic, rising oil prices and populist tax cuts, Sri Lanka’s dire economic situation has led to spiralling inflation and shortages of essential supplies, bringing thousands of citizens onto the streets in protest.
Violence between pro- and anti-government factions and police left nine dead and more than 300 injured last week, and was followed by the resignation of Prime Minister Mahinda Rajapaksa, the president’s brother.
- Reuters, with additional editing by George Russell
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