"We are temporarily suspending interest payments on bonds. We need the foreign exchange reserves to import basic products, including fuel for the people," argues the head of the central bank of Sri Lanka. The country is on the verge of bankruptcy, facing its worst economic crisis in decades.
"Sri Lanka will temporarily suspend debt repayments to foreign investors to avoid a full-blown default," the governor of the country's central bank Nandalal Weerasinghe said on Tuesday. He added that limited foreign exchange reserves are required to import essential items such as fuel. This effectively means declaring the country bankrupt.
"It has come to the point where repaying debts is difficult and impossible. The best action that can be taken is to restructure the debt and avoid a hard default," he argued. Next week, Sri Lanka is expected to begin talks with the International Monetary Fund (IMF) on a loan program.
At the beginning of the year, Sri Lanka's foreign debt reached 7.3 billion dollars. The government was unable to service it. As a result, it could not pay for importing raw materials and other essential products. There was also a shortage of fuel, which caused power cuts lasting up to several hours and led to the suspension of transport in some parts of the country.
The island nation is suffering from prolonged power cuts and food and medicine shortages. All because of the worst currency crash in decades. Residents of Colombo, Sri Lanka's capital, say they are eating half as much as they used to because food prices have doubled in less than a year. Owners of cafes, bakeries and saloons had to lay off workers. They faced the prospect of shutting down their businesses altogether as hours-long power cuts drove away customers.
Shortages, power outages and high food prices sparked mass protests and a political earthquake. In early April, all government members resigned, except the president and prime minister. Meanwhile, citizens are blaming the president for the dire state of the economy. "Gota (President Gotabaya Rajapaksa) go home," "We have had enough," "The country belongs to everyone, not to one family," read the banners during the protests organized in April in the capital of Sri Lanka.
Tens of thousands of protesters are swarming the streets of the capital, clashing with security forces outside the ruling family's official residences. They are running low on essential goods and patience — and demanding that the president step down.
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