South Asian Country Defaults On $51B External Debt Amid Concerns Of Food, Fuel Shortages

Amid the deepening financial crisis in the country, Sri Lanka defaulted on its $51 billion foreign debt, pending a bailout from the International Monetary Fund, with whom the talks are scheduled for the end of this month.

Grappled by acute food and fuel shortages and long electricity blackouts, the crisis has brought widespread suffering for 22 million people in one of the most painful downturns since its independence in 1948.

The Sri Lankan finance ministry said the country was defaulting on all external obligations, including loans from foreign governments. "The government is taking the emergency measure only as a last resort in order to prevent further deterioration of the republic's financial position," the statement from the ministry added.

The country is seeking to preserve its remaining dollars for essential food and fuel imports in case major shortages arise, Bloomberg first noted.

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It further added that the creditors were free to capitalize on interest payments or opt for payback in Sri Lankan rupees.

Sri Lanka's foreign exchange reserves dropped 16.1% to $1.93 billion in March from a month earlier; the central bank said last week. According to a Bloomberg report, around $8.6 billion worth of debt payments falls due this year.