Prime Minister Ranil Wickremesinghe says the political crisis dealt a 'death blow' to Sri Lanka's struggling economy. (Photo: AFP)

COLOMBO - AFP
Sri Lanka struggles to repay record foreign debt: PM

Sri Lanka's prime minister said Thursday (Jan 10) the country was struggling to pay back its ballooning foreign debt, blaming a recent political crisis for dealing a "death blow" to the economy.

Ranil Wickremesinghe said his government was scrambling to raise US$1.9 billion to help service a first debt payment of US$2.6 billion, that is due on Monday.

Sri Lanka faces US$5.9 billion in foreign debt repayments in 2019, a record for the cash-strapped island.

The country lost US$1 billion in foreign reserves during a power struggle between Wickremesinghe and President Maithripala Sirisena in late 2018.

Sirisena sacked Wickremesinghe in October and later dissolved parliament to quell any opposition, but Sri Lanka's courts deemed the move unconstitutional.

Wickremesinghe was reinstalled 51 days later but not without a cost, the prime minister said.

"We are yet to quantify the losses, but it was a death blow to an economy that was struggling to recover," Wickremesinghe told parliament.

Three global ratings agencies downgraded Sri Lanka during the crisis, making it more expensive for the Indian Ocean nation to access foreign loans.

Sri Lanka hopes to raise US$1 billion from the international debt market, another US$500 million from China and Japan and a further US$400 million from the Reserve Bank of India.

Wickremesinghe has dispatched his finance minister to Washington to try to revive a loan arrangement with the International Monetary Fund that was suspended during the chaos.

Sri Lanka narrowly averted defaulting on its sovereign debt after Wickremesinghe's reformed administration introduced a plan late last month to meet urgent spending obligations for the first four months of 2019.

Sirisena came to power in 2015 with the help of Wickremesinghe's United National Party but personal and political clashes came to a head before the October sacking.

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