Sri Lanka, also in the midst of a fuel crisis, defaults on its debt
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."
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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.
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Brigid Kennedy worked at The Week from 2021 to 2023 as a staff writer, junior editor and then story editor, with an interest in U.S. politics, the economy and the music industry.
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