Sri Lanka goes bankrupt for the first time in its history

Sri Lanka has declared bankruptcy for the first time in its history as the government tries to stop the economic collapse that has sparked mass protests in the country and a political crisis, according to Bloomberg.

Policy-makers have told the country’s creditors that they will not be able to make payments until the country’s debt-restricted bankruptcy is restructured, central bank governor Nandalal Weerasinghe told a news conference on Thursday.

The coupon payments, originally due on April 18, worth a total of $ 78 million in maturing bonds in 2023 and 2028, had a 30-day grace period ending on Wednesday.

Sri Lanka is mired in a crisis amid rising inflation – with the central bank governor estimating a further rise to 40% in the coming months – the huge slump in the domestic currency and the economic crisis that has left the country without available reserves in hard currency to meet its food and fuel import needs.

Citizens’ anger has led to violent protests, with the government announcing last month that it would stop paying $ 12.6 billion in foreign debt to save liquidity on needed goods.

This is the country’s first bankruptcy since gaining independence from Britain in 1948. Its bonds are among the worst-performing in the world this year and are trading at a loss, with holders preparing for losses approaching 60. cents on the dollar.

Sri Lanka is negotiating with the International Monetary Fund for a bailout package and needs to negotiate a debt restructuring with its creditors. The country has announced that it needs between $ 3 billion and $ 4 billion this year to get out of the crisis.