Sri Lanka starts five-day bank holiday to restructure domestic debt

Sri Lanka has began a five-day bank holiday from Thursday to allow the crisis-hit nation to restructure $42bn (£33.2bn) in domestic debt.

There are fears that the government’s restructuring plan could lead to volatility in financial markets.

The country is facing its worst economic crisis since it won independence from the British in 1948.

Earlier this week, Sri Lanka President Ranil Wickremesinghe reassured the public that the restructuring would “not lead to a collapse of the banking system”.

Wickremesinghe’s office said his cabinet had approved a restructuring proposal by the country’s central bank. The plan will be submitted to parliament for approval over the weekend.

“(The) government expects the entire process to conclude while the markets are closed during these five days,” Sri Lanka central bank chief Nandalal Weerasinghe said.

He added that “local depositors are assured of the safety of their deposits and interests will not be affected”.

The move to restructure domestic debt comes as the country is struggling to come out of its worst economic crisis.

Last year, Sri Lanka defaulted on its debt with international lenders for the first time in its post-independence history.      BY  THE STAR