New Delhi: Sri Lanka has averted a major default as it repaid a $500 million international sovereign bond (ISB) that matured on January 18, the Central Bank of Sri Lanka said on Tuesday.
The island nation managed this amid a severe forergn exchange crisis and increasing external debt.
"Sri Lanka has paid the USD 500 million sovereign bond that matured today (Jan 18)," Central Bank Governor Ajith Cabraal tweeted.
Earlier this month, India announced a $900 million assistance to Sri Lanka for food imports and to help the country rebuild its foreign reserves.
The next payment towards ISBs, amounting to $1 billion, is due in July. Sri Lanka's total debt burden for this year is over USD 6 billion, according to reports.
The island nation heavily depends on imports even for essential items, and it is facing a food crisis due to the scarcity of foreign exchange.
International economists and rating agencies had expressed doubts if Sri Lanka would be able to meet the total ISB payments of $1.5 billion — including the $500 million issued in 2012 — due for settlement. There were suggestions from many quarters to seek assistance from the International Monetary Fund (IMF) to help tide over the crisis.
The local business fraternity, opposition parties and economists had also suggested deferring the payment in view of the shortage of forex, which they said should be used for the imports of essentials.
Sri Lanka had been, however, saying that it would repay the debts on time.
President Gotabaya Rajapkasa had, however, urged visiting Chinese foreign minister Wang Yi last week to restructure its debt as Sri Lanka owes over $2 billion to China this year. China is Sri Lanka's fourth biggest lender after financial markets, Asian Development Bank and Japan.
Addressing Parliament on Tuesday, President Rajapkasa said his government's most serious challenge is the economic management amid the current foreign exchange crisis, news agency PTI reported.
“Today we are encountering the climax of a problem for which a number of governments have failed to provide a lasting solution...More than USD 6 billion a year in foreign debt is to be repaid over the next two years. It is the loans taken by all previous governments from time to time that we have to repay," he was quoted as saying.