Article: Sri Lanka Default

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Sri Lanka to Default on ENTIRE $51BN External Debt 

The Central bank of Sri Lanka claims the country will default on ALL of its external debt after it suspended debt payments Tuesday - unless it receives a massive bailout. (AFP)

Sri Lanka has approached the IMF seeking an emergency recovery program, as 13-hour daily power cuts have been imposed.

All but two of Sri Lanka’s entire cabinet resigned on April 4, with the new Finance Minister quitting too within 24 hours.

Message by MMJ Malaysia to other Monetary Reformers of the World re Sri Lanka

The danger of taking debt to impress your populace you are bringing development to your country. If you are President of a country, huge Port developments or International Airport construction, going on in your country is a sign you are a good President bringing development to your country, no? No, actually. It's about time we bring a new understanding and narrative into play. Is the development funded by debt or equity? Or in the case of Sri Lanka - will the revenue from the developments more than cover the debt payments to be made? In this particular Sri Lankan's case the huge international airport was built on China debt in a remote location near the Presidents home village.

The Port, also on China debt, while suitably located with deep water and all, was an unnecessity since Colombo Port still have very significant capacity. So this President rode high on being the Development to Sri Lanka President without carefully calculating the debt danger he brings his country into. Now the problem comes home to roost. An empty huge spanking brand new International Airport and a grossly under capacity also brand new sea port.

The trouble with international debt is you need foreign currency to serve the debt payments. If these came from the new development revenues that's fine. But if that source is too little or zero then debt payments compete with food purchase in the usage of the country's foreign currency. We know about Sri Lanka food shortage and Petrol pump riots but schools were affected recently when the govt cancelled exams for shortage of paper! Think, think, think before going into debt.

Many economic developments can be done with home resources without need for foreign debt. The thinking person will also ask- that southern port of Sri Lanka - Is it more beneficial and strategic to Sri Lanka or China? Monetary Reformers need now to be harbingers of the danger of external debt for a nation's development.

We have solutions for this, as we have solutions for the nation's monetary system. Isn't it time Monetary Reformers the world over consider an uptick in Strategy?

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Dikemaskini [Updated]: Sam Ahmad 20230627