Sri Lanka announces debt default, says can repay in local currency

Sri Lanka will default on its debt to other countries, that is the headline out of the debt-stricken island nation as it grapples for economic relief from the IMF.

In a notification issued by the finance ministry, Sri Lanka alerted the world that they will suspend debt repayments for an interim period. The country in crisis however left the option for creditors to take payments in the local currency Sri Lankan Rupees as foreign exchange remains critically low and reserved for fuel purchases.

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"The government is taking the emergency measure only as a last resort in order to prevent further deterioration of the republic's financial position," the statement said.

It added that the immediate debt default was to ensure "fair and equitable treatment of all creditors" ahead of an International Monetary Fund assisted recovery program for the South Asian nation.

Sri Lanka was negotiating a program with the IMF and bilateral support was also expected. The nation is grappling with its worst economic downturn since independence, with regular blackouts and acute shortages of food and fuel.

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