SL Government temporarily suspends foreign debt servicing

Sri Lanka will be temporarily suspending foreign debt payment servicing to avoid an evident default with a view of saving limited foreign reserves required for imports of essential items such as fuel, the Finance Ministry announced.

This decision has been taken with the aim of debt restructuring with the support of the International Monetary Fund, the ministry said in a media release this afternoon.  

It revealed that the foreign debt restructuring will be carried in accordance with the country’s economic planning programme with streamlined system and proper agreements with foreign debtors.

However this government policy is applicable for the amount of loans up to 12 April 2022 and it is not valid for new loan facilities taken after that date, the media release clarified stating that those debts are not subjected the new policy.

Sri Lanka is due to start talks with the International Monetary Fund (IMF) on a loan programme next week,

The island nation’s foreign reserves stood at a paltry $1.93 billion at the end of March, with foreign debt payments of around $4 billion due this year, including a $1 billion international sovereign bond maturing in July.

“This will be on a temporary basis until the government arrives at an agreement with creditors and with the support of a programme with the IMF,” the statement said. (Bandula)