New York-based ratings agency Fitch has downgraded debt-ridden Sri Lanka's sovereign rating to "restricted default" after the country defaulted on making international sovereign bond payments at the end of the 30-day grace period.
The downgrade came when the Central Bank governor P Nandalal Weerasinghe conceded on Thursday that Sri Lanka wouldn't be able to pay back its debts until it restructures them.
The bond payments, which were due on April 18, were worth $78 million, with a 30-day grace period that expired on Wednesday.
On April 12, Fitch had downgraded Sri Lanka to 'C'. "We have downgraded Sri Lanka's foreign-currency issue ratings to 'D' from 'C', given the default on the senior unsecured foreign-currency bonds and the cross-default clauses triggered in the other rated international foreign-currency sovereign bonds," the rating agency said on Thursday.
The damning downgrade means that the island nation of 22 million people fell into default for the first time in its history, even as the new government headed by Prime Minister Ranil Wickremesinghe tries to end the crippling economic meltdown that has prompted wide-scale protests and a full-blown political crisis.
Mr Wickremesinghe said on Wednesday that the country had missed a payment to the Asian
Development Bank, blocking fresh funds amid warnings that the currency crisis-hit country could be locked out of multilateral funding in a new blow.
Sri Lanka has already suspended repayments for international sovereign bonds, commercial bank loans, Exim bank loans, and bilateral loans. However, multilateral lenders and senior creditors were excluded. Sri Lanka is now negotiating a loan with the IMF.
The country had to pay $106.34 million this year but only managed to pay $12.4 million by April.
Mr Weerasinghe said on Thursday that the nation had announced a pre-emptive default.
"We have announced a pre-emptive default; we have announced that we are not going to pay," he said.
Mr Weerasinghe said, "you can technically term it a hard default based on the agreements".
He said on April 12 that Sri Lanka had announced its suspension of debt payments as it couldn't pay.
"We had already announced that we will not be able to pay until we restructure the debt, he said, adding that the appointment of financial advisers and lawyers for debt restructuring could be made soon.
On Thursday, Mr Wickremesinghe accepted a generous offer from Maldivian Speaker Mohamed Nasheed to assist the debt-ridden island nation's bid to secure international relief in the ongoing economic crisis.