Sri Lanka is sliding into a default as the grace period on two unpaid foreign bonds ends on Wednesday, the latest blow to a country rattled by economic pain and social unrest.
The island nation could be formally declared in default if it fails to make an interest payment to bondholders before the deadline, when the 30-day grace period for missed coupons on dollar bonds ends. That would mark its first default on its foreign debt obligations, Bloomberg reported on Monday.
Sri Lanka’s government announced in mid-April it would stop paying back its foreign debt to preserve cash for food and fuel imports as it struggled with a dollar crunch that led officials to implement capital controls and import curbs.
A few days later, it failed to service a $78 million coupon on its dollar bonds due in 2023 and 2028, leading S&P Global Ratings to declare a selective default.
Sri Lankan Prime Minister Ranil Wickremesinghe, who was appointed last week following violent unrest, will provide a “full explanation” of Sri Lanka’s financial crisis on Monday. He also said Sri Lanka is in the process of exploring other options of securing funds to pay for the coming week’s fuel requirements given the dollar scarcity in banks.
He is expected to hold discussions with the attorney general’s department on curbing President Gotabaya Rajapaksa’s sweeping executive powers and the proposals will be presented to Cabinet for approval, he said in a series of tweets.
The Sri Lanka Freedom Party, once allied with President Rajapaksa’s government but now independent, has decided to join the new administration by putting forward its members of parliament for cabinet positions. A meeting between the party lawmakers and the prime minister will be held on Monday.
The main opposition Samagi Jana Balawegaya party said it won’t join the government. India’s diplomatic mission in Sri Lanka also said that 12 shipments of diesel, or more than 400,000 metric tonnes, were delivered to Colombo on Sunday under a credit line between the two nations.
For weeks Sri Lanka has been grappling with major fuel shortages that have seen drivers queuing for hours outside gasoline pumps and businesses struggling to secure diesel for power generators amid hours-long power cuts.
Sri Lanka has 4 million Tamils,whose loyalty is to India,and who want to,and always wanted,to secede.
There was a 3 decades war,which drained the Sri Lanka economy – had Lanka set up the right manufacturing sector,in those decades – the nation would have been a superpower today.It is the land of Ravana,who flew Sita,the empress of Indiamin an AEROPLANE,and Rama took 12 years to make a bridge,to reach Lanka (with the bridge made by apes)
It was the RAW which funded and trained the LTTE,and has caused the ruin of Lanka.RAW also interfered in the Lanka elections and Presidential selection,on many times.It had INT,on the “almost successful assassination”
of Gen Fonseca (but did not tip off the Lankan INT)
HAD THE WAR NOT TAKEN PLACE – LANKA WOULD HAVE SAVED BILLION IN USD IN WAR MONEY AND ALSO EARNED BILLIONS IN USD IN INDUSTRIAL GROWTH
Companies go bust NOT due to the secured loans of 5-10 years – which are secured by English & Equitable Mortgages – but by the UNSECURED LOANS which are of short tenors & Floating ROI
Lanka is in the same hole
It was sunk by the ISB – Euro Bonds – which were taken after the 2009 war was over.It was rolled over & the party went on – just like LC roll overs.Then the downgrades of Lanka happened,& ROLLOVERS STOPPED – & the, COVID,& the CHEMICAL FERTILISER BAN
Lanka Debt to GDP is 120 %
Lanka Foreign debt to GDP is 50%
Lanka Tax to GDP is 8% =
Lanka has 1 Billion in FX & 13 Billion of ISB & 8 Billion of ISB in 12 months as due for payment
Lanka exports are doomed
Lanka has food shortages
Lanka depleted Billions of USD to defend the SLR – which led to loss of remittances
The Disasters of Gotabaya
Banning Chemical fertilisers – which led to dramatic declines in rubber and plantation yields,and rice and other food crops – which in turn,led to food shortages,crash in exports and expensive food imports and loss of FX – He says that it was done to SAVE FX ! (Who gave him that advice)
Slashing VAT by half and lowering Taxes on incomes
Making up loss of tax revenues by ISB of short tenor and high ROI
Using FX reserves to pay off ISB
Sugar and Coconut Oil Import duty scam to benefit his pets
USING PRECIOUS FX TO DEFEND THE SRI LANKAN RUPEE – WHICH SHOULD HAVE BEEN ALLOWED TO COLLAPSE A LONG TIME AGO
BUT THE REAL DISASTER WAS THE FERTILISER BAN WHICH CAUSED FOOD IMPORTS AND REDUCTION IN PLANTATION EXPORTS – IN A COVID TENOR – WHEN TOURISM WAS DOWN
AND THIS COULD NOT HAVE BEEN HIS IDEA !
The empty stadiums,empty roads,empty airports,empty towers – yield no income – but are financed by 20 year loans at 10 to 320 BP ROI.Even the 500 Million USD loan of ISB repaid by Lanka,WAS BOUGHT IN OFF MARKET TRADES,AT 50% OFF THE PAR VALUE (BEFORE THE REDEMPTION).
PRC CANNOT WAIVE THE LOANS OR SWAP INTO EQUITY AS ALL OTHER NATIONS WILL ALSO DEMAND THE SAME WAIVERS
LANKAN CRISIS IS A HYBRID ASSYMETRIC WAR AGAINST PRC – SILK ROUTE & BRI – TO DESTROY THE PRC INVESTMENTS – & FORCE CHINA TO DO DEBT WAIVERS OR EQUITY SWAPS. (SAME FOR ATTACKS ON CHINESE IN PAKISTAN).dindoohindoo
If there is NO TURNAROUND OPTION on the table – then NO ONE WILL LEND ANY MONEY – ONLY OPTION IS GRANTS – WHICH ALSO,DID NOT COME – FROM THE INDIANS !
Had Lankans stuck with the Chinese – this fiasco would NOT HAVE HAPPENED – AS PRC WOULD HAVE ENSURED THE LANKAN SUCCESS – AS IT WOULD HIT THE SILK ROAD INITIATIVE & THE PRC INVESTMENTS,IN AFRICA.PRC is a MAHAYANA state & Lanka is a Theravada state – the common link is Buddhism.India destroyed & exterminated Buddhists 1500 years ago.
THE INDIANS CONNED THE LANKANS,TO PART WAYS WITH PRC – & THE RESULT IS WHAT YOU SEE TODAY.HAD THE PLN DOCKED ITS NUKE SUBS & SHIPS AT LANKA – THEY WOULD HAVE ENSURED THE SUCCESS OF LANKA
Lankans need to read history ! Some gems from the Mahabharata
“Yama & all the Demons”, are in South India & Lanka – as per the Mahabharata, Book 13: Anusasana Parva: Section XCVII
He should make sacrificial offerings in due order; to Yama in the Southern region