As Sri Lanka’s financial crisis worsens, economists on the island have called on the government to forego debt repayments and buy crucially needed fuel, food and medicine, with one former official warning riots may soon follow.
Sri Lanka is due to make a US$500 million payment as an international sovereign bond matures on January 18.
Economists on the island however said the government should default on the payment and focus on essential goods instead.
Shanta Devarajan, a former World Bank chief economist, said that the US$500 “million could enable people, especially poor people, to buy and cook food for themselves and their children… Instead, the government is choosing to reimburse bondholders, who are hardly poor."
Anila Dias Bandaranaike, a former assistant governor at the central bank, “warned of possible food riots if Sri Lanka runs out of foreign reserves,” reports Nikkei Asia. Available foreign currency reserves "must be used to meet essential needs, not to repay $500 million [in] debt maturing next week," she added.
Read more from Nikkei Asia here.
The looming debt payments come amidst a series of negative ratings from international credit agencies and Bloomberg reported that a “top emerging-market money manager” is reportedly “waiting for Sri Lanka to default”.
This week a government official warned that Sri Lanka may face a shortage of drugs within two months as the worsening economic crisis threatens to endanger even more livelihoods.