Sri Lanka

About Sri Lanka

Sri Lanka defaulted on its sovereign debt in April 2022. The country faced severe shortages of fuel, food, and medicine. President Gotabaya Rajapaksa had implemented tax cuts that reduced revenue, banned chemical fertilizers overnight, and borrowed heavily for infrastructure. Foreign reserves were depleted. The economic crisis triggered mass protests. In July 2022, protesters stormed the presidential palace. Rajapaksa fled the country and resigned. Sri Lanka secured a 2.9 billion IMF program in March 2023. The debt restructuring involved both bilateral creditors including China, Japan, and India, and bondholders. China, the largest bilateral lender, initially resisted concessions. The Sri Lanka default was the first major Asian sovereign default since the 1997 crisis and highlighted the risks of Chinese lending.