Sri Lanka’s debt default has begun, according to credit bureaux, as protesters rejected prime minister Mahinda Rajapaksa’s proposal to hold talks.
S&P Global Ratings have reduced the island nation’s foreign exchange rate to “CC” from “CCC” meaning unprecedented economic hardships brought on by the dried up foreign exchange reserves.
“The Sri Lankan debt restructuring process is likely to be complex and may take months to complete,” the agency said in a statement. According to a financial services company, the “CC” rating represents “the default has not yet occurred, but is expected to be a definite guarantee”.
Similarly, Fitch Ratings has reduced the level of scrutiny of a South Asian country for its decision to suspend foreign debt payments. It said the “autonomous automation process has started” and will move the country to RD “if payment for production has been exceeded and the grace period has expired”.
Sri Lanka on Tuesday announced the failure to repay all its $ 51bn foreign debt as a “last resort” to survive the worst financial collapse since gaining independence in 1948. reserved for importing essentials.
Shortages of food, fuel, medicine and long-term power outages have forced thousands of local people to protest the Sri Lankan government over its handling of the crisis. Complaints about the resignation of President Gotabaya Rajapaksa and his family erupted last weekend when protesters stormed the presidential palace.
On Wednesday, protesters rejected the prime minister’s request to hold talks and continued his demand for the Rajapaksas to step down.
“The prime minister is ready to start negotiations with the protesters in Galle Face Green,” Mr Rajapaksa’s office said in a statement, referring to the protests that have become a hotbed of dissatisfaction.
However, dismissing the proposal, one of the protesters was quoted by News 1st channel as saying: “We are not here to speak.”
The protest site, a tent camp in Colombo, has been growing in volume as “Gota Go Home” repeats in the heat of April.
Locals marked the start of the Sri Lankan New Year on Thursday by boiling a small pot of milk at the protest site. “We used to wish you all the best for the new year. We now wish the best for the struggle, ”said Jayaratna Teekanoon, 56,.
In his State of the Nation Address on New Year’s Eve, the president said the crisis was a major challenge facing the country over the years. “We must overcome this challenge with unity and better understanding,” he said in a statement.
Sri Lanka is expected to begin talks with the International Monetary Fund next week over a loan program.
India is set to extend $ 2bn in financial assistance to Sri Lanka as China remains silent on its promised $ 2.5bn debt line. “We are definitely looking to help them and we are determined to provide more alternatives to the loan,” an Indian source familiar with the various interviews told Reuters.
Indian Finance Minister Nirmala Sitharaman met with Sri Lankan High Commissioner to India Milinda Moragoda on Wednesday to review the state of the joint economic cooperation.
India has so far committed $ 1.9bn to the island nation on loans, debt lines and currency exchanges on humanitarian grounds. Prior to New Year’s Eve, the Asian giant had also shipped sugar cane, rice and wheat – the rest of the supplies.