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Country Set to Default on Sovereign Debt: Sri Lanka Latest

Three-wheelers line up for fuel at a gas station in Colombo on May 16.

Three-wheelers line up for fuel at a gas station in Colombo on May 16.

Photographer: Buddhika Weerasinghe/Bloomberg
Updated on

Sri Lanka is set to default on $12.6 billion of overseas bonds as its new prime minister struggles to stabilize an economy spiraling into chaos fueled by a lack of dollars and surging inflation. 

The South Asian nation is set to blow through the grace period on $78 million of payments Wednesday, marking its first sovereign debt default since it gained independence from Britain in 1948. Its bonds already trade deep in distressed territory, with holders bracing for losses approaching 60 cents on the dollar. The government said last month it would halt payments on foreign debt.