Sri Lanka's economy has been in a state of turmoil for months, with a severe shortage of foreign currency and soaring inflation leading to a chronic shortage of medicines, fuel, and other essentials.
On Wednesday, a 30-day grace period to repay $78m (£63m) of unpaid debt interest payments expired, marking the country's first-ever default on its debt.
Central Bank Governor P Nandalal Weerasinghe described the situation as a 'pre-emptive default', stating that the country would not be able to pay its debts until a debt restructuring agreement is reached.
Defaults can damage a country's reputation, making it harder to borrow money on international markets, which can further harm confidence in its currency and economy.
The country has already started talks with the International Monetary Fund over a bailout and needs to renegotiate its debt agreements with creditors.
President Gotabaya Rajapaksa's government has said it needs as much as $4bn this year, and the central bank has warned that inflation is likely to rise further, with headline inflation expected to reach 40% in the next couple of months.
Protests against the government have been ongoing, with large and sometimes violent demonstrations taking place in recent weeks.
