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Sri Lanka is in highest risk of foreign debt default in Asia

The Bloomberg reported last week that Sri Lanka was the highest default risk in the Asia-Pacific, overtaking Papua New Guinea, Kazakhstan, Mongolia, Pakistan, Malaysia and Indonesia. The news agency’s “debt default probability” scale now rates Sri Lanka at almost 28 percent, up from 13 percent six months ago.Under Bloomberg’s model any country rated over 1.5 percent is deemed to be at “a high risk of failure to pay.” It also said that Sri Lanka’s “first test comes on July 27,” when it must repay a $US1 billion bond to investors.

“[S]peculation is growing,” it continued, “that it may need to turn to the International Monetary Fund [IMF] for additional finances after securing assistance from countries including China.” Attempting to downplay the deepening crisis, Sri Lanka’s Minister for Finance and Capital Markets Ajith Nivard Cabraal insisted that loans would be repaid on time. Question may arise: Should that assurance covers for the loan Bangladesh has provided to Sri Lanka?

Pic of Sri Lanka’s Finance Minister, Ajith Cabraal, taken from Twitter

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