Had the honor to participate in a panel on #SriLanka. Was asked about comparisons to #Pakistan. Will they too default on their commercial debt? 1/X 1) Going into 2022 Sri Lanka's foreign public debt to GDP was 40-45%, vs Pakistan's 20-25% (interval as no final GDP number)
2/X More importantly the commercial share of #SriLanka's FX debt (the part that is owned by bond investors in London and NY) was 22-25% of GDP, vs #Pakistan's 5-6%. Both had ca USD 18bn in commercial debt, but #Pakistan is a significantly larger economy.
3/X #SriLanka's government refused IMF negotiations when covid hit (and USD 4bn of tourism revenue was no longer an option). Instead introduced capital controls, hoping that tourism would recover in time for them to make their debt payments. They ran FX reserves down to zero (0)
4/X I can only explain this as a gamble with 21 million people's lives, which they lost. When #Ukraine #Russia crisis hit the bluff was called. Coffer was empty, no money to buy fuel, no money for medicines, you name it.
5/X #SriLanka defaulted on their eurobonds because there was literally 0 USD to pay with. #Pakistan has USD 2bn in maturing eurobonds in 2022, another 2 in 2024. If they want to, they can pay these.
6/X #Pakistan can be forced to enter a debt restructuring but it will then be due to failing negotiations with IMF and friendly states. It will NOT be their commercial debt that trips them. This makes the question of default more of a political discussion, than anything else.
