xSri Lanka said it would suspend foreign debt repayments, as the country suffering from double-digit inflation and daily power outages seeks to conserve its dwindling foreign reserves for essential food and fuel imports, WSJ Pro Bankruptcy reported. On Tuesday, Sri Lanka’s finance ministry said a comprehensive restructuring of its outstanding foreign-denominated debt was required and that the government had approached the International Monetary Fund for emergency financial assistance. It said the coronavirus pandemic and the war in Ukraine — which have hurt tourism revenue and driven up commodity prices — had eroded the country’s finances to the point it could no longer pay its debts. Sri Lanka’s financial problems had taken root earlier, economists say, stemming from an accumulation of debt on infrastructure spending and sweeping tax cuts that decimated government revenue. They said the unilateral suspension of debt repayments, which amounted to an effective default, was another reflection of Sri Lanka’s dire financial state. “It is purely just a final recognition of how close we are to the brink,” said Anushka Wijesinha, an economist at the Centre for a Smart Future, a Colombo-based think tank. All outstanding payments to bondholders, bilateral creditors and institutional lenders will be suspended until they are restructured, the finance ministry said, with creditors able to capitalize interest payments or opt for repayment in Sri Lankan rupees. Currency swap lines from foreign countries, which have provided an important lifeline to the country during the continuing financial crisis, won’t be affected by the suspension, the finance ministry said.
