Sri Lanka to pay interest on state-owned airline’s loan after sovereign debt default
ECONOMYNEXT – State-owned SriLankan Airlines will settle an interest payment of a 175 million US dollar sovereign guaranteed debt, the loss making carrier said on Tuesday, after the country failed to pay foreign sovereign debts since mid April.
Sri Lanka’s central bank and finance ministry have suspended all its foreign debts including interest payments with effect from April 12 and declared a “soft” sovereign debt default after the island nation’s usable foreign currency reserves declined to near zero amid a balance of payment crisis.
Since then, the government defaulted an interest payment of 78 million US dollar of a sovereign bond on May 19 after one month grace period. Central Bank Governor Nandalal Weerasinghe has said no foreign debts will be repaid until the external loans are restructured.
“SriLankan Airlines is pleased to announce that the company has taken the necessary steps to settle the interest relating to its U.S.$175,000,000 / 7.00 per cent guaranteed bond due in 2024 and guaranteed by the Government of the Democratic
Socialist Republic of Sri Lanka (ISIN iXS2010609662),” the Sri Lankan Airlines said in a statement.
“The interest was paid in full within the applicable grace period using company funds.”
It was not immediately clear if the government under new president Ranil Wickremesinghe changed the stance on sovereign debt repayment.
The payment relates to a $175 million bond with a 7% coupon listed in Singapore, according to a filing with the Singapore stock exchange.
A company spokesman declined to comment on the volume of the repayment.
Officials from the central bank and finance ministry were not immediately available for comment on why the government decided to repay SriLankan Airlines’ sovereign guaranteed interest payment while defaulting May 19 sovereign debt repayment payment.
The $84 billion economy is unable to borrow from the global capital market and other countries as its ratings have been downgraded to near default ratings by all three global rating agencies.
The economic crisis with acute foreign exchange shortage had led to lingering protests in the island nation after it led to shortage of essentials like fuel, cooking gas, medicines, and milk powder.
The economic crisis has turned into a political crisis and forced former leader Gotabaya Rajapaksa to flee the country early this month and resign from Singapore months after he changed his cabinet twice and prime minister once.
New President Wickremesinghe has sought a deal from the International Monetary Fund to address the ongoing economic crisis. (Colombo/July 26/2022)
