Sri Lanka which is experiencing its worst economic downturn since its 1948 independence has declared default and is now looking for emergency IMF bailout.
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After crisis-hit Sri Lanka raised interest rates and declared a default on its external debt over the traditional New Year holiday, the Colombo Stock Exchange declared a five-day trading suspension on Saturday.
The market was scheduled to reopen on Monday after being suspended for the entire week, but the CSE announced that it will be closed from Monday to Friday owing to the “present situation in the country.”
The decision comes before Sri Lanka’s scheduled talks with the International Monetary Fund in Washington on Monday to discuss a bailout, since the country has run out of foreign money to cover even basic imports.
After the central bank nearly doubled its benchmark interest rate to 14.5 percent following the closing on April 8, the last trading day before the holiday, brokers expected shares to be battered on Monday.
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Faced with an unprecedented forex crisis, the government announced on Tuesday that it will stop paying interest and capital on its massive foreign debt.
According to the CSE, officials feel it is in the best interests of “market participants if they are afforded an opportunity to have more clarity and understanding of the economic condition.”
The island nation is experiencing its worst economic downturn since its 1948 independence, with regular blackouts, severe food and fuel shortages, and record inflation.
In the last three months, the CSE’s All Share Index has lost more than 38% of its value, while the Sri Lankan rupee has lost more than 35% of its value versus the US dollar.
The crisis has wreaked havoc on Sri Lanka’s 22 million people, sparking weeks of anti-government demonstrations.
For the eighth day in a row, thousands of people camped outside President Gotabaya Rajapaksa’s office, chanting “Go home Gota.”
Sri Lanka had asked India and China for debt relief, but both countries instead provided larger credit lines to buy goods from them.