The Central Bank has issued $ 12.55 billion International Sovereign Bonds (ISBs) in total, out of which $ 1.0 billion is defaulted and $ 667 million of interest payment is in arrears as at end of February 2023 according to charts.lk.

The Long-Term Foreign-Currency Credit rating of Sri Lanka is at Default status. Despite all, Sri Lanka ISBs gained in the international market. IMF in its statement said “For external private debt, a principal reduction is assumed, with amortization beyond the program period, implying a large NPV reduction.”

The difference between now and then is that a greater share of the country’s external debt is borrowed from international capital markets at high interest rates.

From 2010 to 2021, the ISB share of Sri Lanka’s external debt stock tripled, going from 12 percent to 36 percent. Yet in 2021, ISBs accounted for a monster 70 percent of the government’s annual interest payments.

These figures highlight the extent to which high interest borrowing from international capital markets can eat into the foreign currency cash flows of a country, especially when it is wracked by external shocks such as the COVID-19 pandemic and conflict in Ukraine.