Sri Lanka is expected to be placed in default by rating agencies after it failed to issue coupons on two of its sovereign bonds on Wednesday, when the energy minister said the country had run out of money to provide fuel.
The unprecedented economic crisis in the country’s history since independence in 1948 has led to a severe foreign exchange deficit, which resulted in it missing two coupon payments on the April 18 sovereign bond.
Sri Lanka has already stated that it is unable to make the coupon payment, and the 30-day grace period will end on Wednesday.
S&P said that the ratings of bonds maturing in 2023 and 2028 have already been cut to ‘default’ and the country’s overall rating could be further cut to ‘D’ to ensure non-payment after the grace period is over.
Sri Lanka currently has no dollars to pay for petrol shipments, Power and Energy Minister Kanchana Wijesekera told parliament, urging the people to stop queuing for the next two days.
A petrol consignment has been in Colombo port since March 26 but the government has not been able to pay, he added.
“There aren’t enough dollars available to open a letter of credit,” he said.
“We are working to find funds but at least petrol will not be available on weekends. Very small reserve stock of petrol is being released for essential services like ambulance,” he said.
Prime Minister Ranil Wickremesinghe on Wednesday said the country had secured $ 160 million in bridge funding from the World Bank, but it was unclear whether the funds could be used to finance fuel.
“The statistics are blurred,” he said. “But the reality is we don’t even have 1 1 million.”
The epidemic, hit hard by rising oil prices and populist tax cuts, has led to rising inflation and a shortage of essential supplies due to Sri Lanka’s dire economic situation, with thousands taking to the streets in protest.
Violence between pro-government and opposition parties and police has killed nine people and injured more than 300 in the past week, following the resignation of former Prime Minister Mahinda Rajapaksa.
(Except for the title, this story was not edited by NDTV staff and was published from a syndicated feed.)