Crisis-hit Sri Lanka on Tuesday said it would default on its entire external debt worth $51 billion (over Rs 3.88 lakh crore) till it receives a bailout from the International Monetary Fund, AFP reported.

A country’s external debt pertains to the money borrowed by it from foreign lenders through commercial banks, governments, or international financial institutions.

“It has come to a point that making debt payments are challenging and impossible,” Governor of Central Bank of Sri Lanka P Nandalal Weerasinghe said, according to Reuters. “The best action that can be taken is to restructure debt and avoid a hard default.”

In a statement, the finance ministry said that the temporary suspension on payment will be effective on all debts outstanding on April 12.

“The debt servicing suspension will be in force for an interim period pending an orderly and consensual restructuring consistent with the proposed arrangement with the IMF,” the ministry said.

The finance ministry said that it has approached the IMF for assistance to formulate an economic recovery program and for emergency funds.

“The government is also seeking financial help from its other multilateral and bilateral partners,” a statement by the ministry said.

Sri Lanka is due to start talks with the IMF on a loan programme next week, according to Reuters.

Economic crisis

The island nation has been mired in public debt over the last few months. Amid a decline in the country’s foreign currency reserves, Sri Lankans are facing shortages of medicines, milk powder, cooking gas, kerosene and other essential items.

The government has sought help from India and China.

Authorities have imposed 13-hour daily power cuts due to shortage of fuel to operate power plants.

Hundreds of bakeries in the country have shut down because of lack of cooking gas. Several state-run hospitals have stopped conducting surgeries and a state of public health emergency has been declared.

The government has also indefinitely postponed school examinations for Classes 9, 10 and 11 because it does not have stocks on which to print question papers.

On April 4, Sri Lanka’s entire Cabinet, except Gotabaya Rajapaksa and Mahinda Rajapaksa, had resigned en masse from their positions. A new finance minister was appointed, but he too resigned less than 24 hours after he accepted the post.