Sri Lanka defaults for the first time in its history

The head of the country’s central bank agreed to stay on as political stability improves

Given the increase in political stability in the middle of an economic crisis, Sri Lanka's central bank governor says he will stay in his job and will not step down as he had previously mentioned.

Governor P Nandalal Weerasinghe also stated on May 19 that the Central Bank of Sri Lanka was nearing finalizing the measures to restructure the country's debt, and those suggestions would be presented to the government soon, reports Al Jazeera.

Sri Lanka has gone into default for the first time in its history, as the government tries to rescue the country from its economic collapse.

President Gotabaya Rajapaksa's tax cuts have depleted government funds as the Covid-19 pandemic has crippled its crucial tourism business. 

On top of that, the rising oil prices have drained the foreign exchange reserves of the country with 22-million people.

Last week, Weerasinghe told the media that he would leave in two weeks if there was no political stability because any steps the bank made to solve the economic crisis would be ineffective in the face of political uncertainty.

In April, Weerasinghe was appointed to lead Sri Lanka's monetary authority as the government attempts to bring the South Asian country out of its economic quagmire, avoid a bond default, and begin aid negotiations with the International Monetary Fund.

He also predicts that inflation might reach 40% in the next few months, but it would be primarily due to supply-side pressures, with bank and government efforts currently controlling demand-side inflation.

In April, inflation reached 29.8%, with food prices rising by 46.6% year on year.

Ranil Wickremesinghe, an opposition MP, was named prime minister last week and has already appointed four cabinet members. He has yet to appoint a finance minister.