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Sri Lanka pays foreign debt at expense of domestic economy

Drop in tourism income and migrant worker remittances squeeze government income

A man counts Sri Lankan rupee notes at a currency exchange shop in Colombo, Sri Lanka. A U.S. dollar can fetch about 40 more rupees on the streets than at banks.

COLOMBO -- Sri Lanka's central bank trumpeted the country's settling of a maturing $500 million sovereign debt on Tuesday, affirming the ultranationalist government's decision to use its scarce available foreign currency reserves to assuage overseas bondholders while its beleaguered public takes another economic hit.

An 11th-hour financial lifeline from India allowed some breathing room while the funds were released by Nivard Cabraal, who secured a nominal cabinet minister's position following his appointment as the governor of the Central Bank of Sri Lanka in late 2021. New Delhi's offer of a $400 million currency swap with the Reserve Bank of India and a deferment by two months of repayment of a $515 million loan that Colombo owes the Asian Clearing Union, a network nine central banks in the region, followed ministerial-level discussions between the South Asian neighbors.

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