Sri Lanka ordered the Colombo Stock Exchange to be halted next week to give investors time to absorb the countrys unprecedent economic conditions.
Bloomberg News said that the Securities and Exchange Commission of Sri Lanka said, in a statement, that the board of directors of the stock exchange, along with other stakeholders, had sought a temporary closure of the market.
“The SEC has carefully considered the grounds that have been adduced by them and has evaluated the impact the present situation in the country could have on the stock market, in particular the ability to conduct an orderly and fair market for trading in securities,” the statement said.
A Sri Lankan delegation is expected to head to Washington to secure up to $4 billion from the International Monetary Fund and other lenders to help the country pay for food and fuel imports and limit debt defaults.
Last Tuesday, Sri Lanka announced the suspension of foreign debt payments, amounting to $51 billion, and said that it plans to restructure debt and avoid a hard default.
Colombo Stock Exchange officials said they were under pressure from brokers and investors not to reopen on Monday to prevent an anticipated collapse of the market. The CSE said regulators had expressed concern over the “ability to conduct an orderly and fair market” and it would remain closed until Friday due to the “present situation”. The CSE’s All Share Index has shed over 38 percent in the past three months, while the Sri Lankan rupee has fallen by more than 35 percent against the US dollar in the past month.
Sri Lanka is facing the worst economic crisis, characterized by food and fuel shortages, power outages, rapid inflation and huge debts. After the COVID-19 pandemic hit tourism for two years, the Russian war in Ukraine accelerated the deterioration of the economy.
Sri Lanka’s President Gotabaya Rajapaksa declared on April, 2 a general state of emergency after violent protests over the worst economic crisis in decades. He also announced that he would request a rescue plan for his country from the International Monetary Fund to help solve the economic crisis, which caused the foreign exchange reserves to decline by 70 percent in the past two years to about $2.31 billion.