Sri Lanka has, for the first time in its history, defaulted on its debts, as citizens and officials reckon with an "economic and political crisis" brought on by COVID-19 and the war in Ukraine, The Guardian reports Thursday.
The governor of Sri Lanka's central bank said the bank was now in a "preemptive default" after the deadline passed for making $78 million worth of payments to international creditors, The Guardian notes.
"Our position is very clear," central bank governor Nandalal Weerasinghe said Thursday: "Until there is a debt restructure, we cannot repay."
A default occurs when a government is unable to repay some or all of its debt payments, and can have a damaging effect on a country's reputation, currency, and economy, BBC News notes.
Meanwhile, Sri Lanka is also dealing with a terrible fuel shortage, in which the prime minister said Monday that the government is unable to "find even $5 million to import gasoline," The New York Times reported.
Economists are concerned that Sri Lanka might be the first in a "wave of defaults," as other "low- and middle-income countries" contend with "runaway inflation and supply shocks," The Guardian writes.
For now, the country's central bank and government have begun working through a plan with the International Monetary Fund to "commence the external debt restructuring process," the central bank said.