Sri Lanka had asked India and China for debt relief, but both countries offered more credit lines to buy commodities from them.
Digital Desk: After weeks of economic chaos, Sri Lanka announced on Tuesday (April 12) that it would default on all of its external debt - $51 billion - due to a lack of foreign exchange for imports. Colombo described the decision as a "last resort."
Notably, the country is experiencing its worst economic downturn since independence, with frequent blackouts and severe food and fuel shortages.
According to a statement issued by Sri Lanka's finance ministry, creditors, including foreign governments, can capitalize on any interest payments owed to them beginning Tuesday or opt for payback in Sri Lankan rupees.
"The government is taking the emergency measure only as a last resort to prevent further deterioration of the republic's financial position," the statement reads.
It went on to say that the immediate debt default was necessary to ensure fair and equitable treatment of all creditors ahead of the South Asian nation's participation in an International Monetary Fund-assisted recovery program.
The crisis has caused widespread devastation among Sri Lanka's 22 million people and sparked weeks of anti-government protests.
Last year, international rating agencies downgraded Sri Lanka, effectively stopping the country from accessing foreign capital markets to raise much-needed loans to finance imports.
Sri Lanka had asked India and China for debt relief, but both countries offered more credit lines to buy commodities from them.
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