Powerful hedge funds and other investors are holding up vital help for crisis-hit Sri Lanka by their hardline stance in debt-relief negotiations after the Asian country’s $51bn (£42bn) default last year, according to 182 economists and development experts from around the world.
They said extensive debt cancellation was needed to give the economy a chance of recovery and that Sri Lanka would be a test case of the willingness of the international community to tackle a looming global debt crisis.
The group – including the Indian economist Jayati Ghosh, Thomas Piketty, the author of the bestselling book Capital, and Greece’s former finance minister Yannis Varoufakis – said private sector creditors such as investment companies and hedge funds were preventing a deal. Private creditors own almost 40% of Sri Lanka’s external debt stock, mostly in the form of international sovereign bonds, although the higher interest rates levied on the bonds mean they receive more than 50% of external debt payments.
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