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00:00Sri Lanka has defaulted on its debts. That's for the first time in its history its failure to make payments on 12 billion dollars worth of overseas bonds is flashing warning signs to investors that surging inflation is set to take a painful toll. Joining us now is Bloomberg South Asia economy editor Rudi Bakhtiar. Richard. What is the latest then on the default. Well the situation only getting worse for Sri Lanka. The country has already stated that it is in pre-emptive default. They will not be able to be there a debt that is due and they cannot do it on to the long list of restructuring is done. Restructuring itself off the debt is going to take about six more months. And this is of course coming in at a time when the country has no finance minister. As it begins the talks are all for bailout with the International Monetary Fund. In fact its central bank governor today said that he intends to continue even as last week he had threatened that he will resign. He will quit if there is no political stability in the country of the political stability is not restored. And the job for the central bank governor is not going to be an easy one given the fact that we are seeing a runaway inflation in the country. In fact it is possible that from a 30 percent level inflation will rise to 40 percent in the next reading. Besides that the country is reporting shortages across the board from food to fuel essential supplies gasoline. The country has no dollars to pay. Its forest reserves are dwindling in fact. They hardly have any money at the moment. And this is certainly going to make life difficult for the policy makers. After the resignation of the former prime minister Mahinda Rajapaksa there is a new man at the helm. But remember he still needs a team because many of the opposition leaders are already refusing to join the cabinet. And as I said this is only going to worsen troubles for the country going forward.

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Sri Lanka Enters Default, Warns of Surging Inflation

Sri Lanka fell into default for the first time in its history as the nation missed grace period payments on bonds worth $78 million. Ruchi Bhatia has the details on Bloomberg Television. (Source: Bloomberg)

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