Sri Lanka Set to its Historic Default Since its Independence in 1948

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

The debt strapped nation is at the end of grace period on $78 million payment. 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.

The new Prime Minister Ranil Wickremesinghe is yet to fill the post of finance ministry who would lead talks with the International Monetary Fund.

Meanwhile, he warned on Monday that the country was down to its last day of gasoline supplies, as it didn’t have the dollars to pay for shipments aboard tankers anchored just offshore. He also said it would need to print money to pay government salaries, a move that will worsen inflation already running near 30%.

The state-run Ceylon Petroleum Corporation has sufficient stocks of diesel at hand but there is a “severe” shortage of petrol, the company’s director-general of marketing Krishantha Wickramasinghe told reporters in Colombo.

He said the crisis could ease with the arrival of another shipment Wednesday.