sri lanka
Sri Lanka needs to get started on negotiations with the IMF for immediate release of aid - but first it needs a finance minister. Image Credit: Bloomberg

Colombo: Sri Lanka is set to default on $12.6 billion of overseas bonds due to the chaos fueled by lack of dollars and surging inflation. The South Asian nation is set to blow through the grace period on $78 million of payments Wednesday, marking its first sovereign debt default since it gained independence from Britain in 1948.

Its bonds already trade deep in distressed territory, with holders bracing for losses approaching 60 cents on the dollar. The government said last month it would halt payments on foreign debt.

Prime Minister Ranil Wickremesinghe, appointed last week, is yet to choose a finance minister, who will help lead talks with the International Monetary Fund over badly needed aid. He warned on Monday that the country was down to its last day of gasoline supplies, as it didn’t have the dollars to pay for shipments aboard tankers anchored just offshore. He also said it would need to print money to pay government salaries, a move that will worsen inflation already running near 30 per cent.