Sri Lanka, also in the midst of a fuel crisis, defaults on its debt

Central Bank of Sri Lanka.
(Image credit: Buddhika Weerasinghe/Bloomberg via Getty Images)

Sri Lanka has, for the first time in its history, defaulted on its debts, as citizens and officials reckon with an "economic and political crisis" brought on by COVID-19 and the war in Ukraine, The Guardian reports Thursday.

The governor of Sri Lanka's central bank said the bank was now in a "preemptive default" after the deadline passed for making $78 million worth of payments to international creditors, The Guardian notes.

"Our position is very clear," central bank governor Nandalal Weerasinghe said Thursday: "Until there is a debt restructure, we cannot repay."

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

A default occurs when a government is unable to repay some or all of its debt payments, and can have a damaging effect on a country's reputation, currency, and economy, BBC News notes.

Meanwhile, Sri Lanka is also dealing with a terrible fuel shortage, in which the prime minister said Monday that the government is unable to "find even $5 million to import gasoline," The New York Times reported.

Economists are concerned that Sri Lanka might be the first in a "wave of defaults," as other "low- and middle-income countries" contend with "runaway inflation and supply shocks," The Guardian writes.

For now, the country's central bank and government have begun working through a plan with the International Monetary Fund to "commence the external debt restructuring process," the central bank said.

To continue reading this article...
Continue reading this article and get limited website access each month.
Get unlimited website access, exclusive newsletters plus much more.
Cancel or pause at any time.
Already a subscriber to The Week?
Not sure which email you used for your subscription? Contact us