Sri Lanka’s bonds have tumbled ahead of a visit tot the island by US Secretary of State Mike Pompeo, as the island’s already struggling economy lurched further into crisis.
Bonds have already slumped almost 40% this year, states Reuters, as Colombo was hit hard by the global coronavirus pandemic. On Friday, they fell further after a US State Department briefing said Sri Lanka had to “make difficult but necessary decisions to secure its economic independence for long-term prosperity”.
“We encourage Sri Lanka to review the options we offer for transparent and sustainable economic development in contrast to discriminatory and opaque practises,” said State Department official Dean Thompson.
Reuters went on to add,
All the tell-tale crisis signs are there: a tumbling currency, credit rating downgrades, bonds at half their face value, debt-to-GDP levels nearing 100% and almost 70% of government revenues being spent on interest payments alone.
Sri Lanka’s central bank has repeatedly vowed however that the country will “honour all its debt service obligations”.
External debt payments between now and December amount to $3.2 billion. Other costs could bring that up to $6.5 billion in the next 12 months, analysts estimate, while its FX reserves of just $7.4 billion leave it barely covered.
See the full text of the Reuters piece here.