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Kuwait’s Development Fund: Sri Lanka’s Debt is ‘Sovereign,’ Can’t Be Canceled

Kuwait’s Development Fund: Sri Lanka’s Debt is ‘Sovereign,’ Can’t Be Canceled
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Kuwait’s Development Fund: Sri Lanka’s Debt is ‘Sovereign,’ Can’t Be Canceled

Kuwait’s Development Fund: Sri Lanka’s Debt is ‘Sovereign,’ Can’t Be Canceled

The Kuwait Fund for Arab Economic Development (KFAED) affirmed on Wednesday that the debts other countries owe it are “sovereign.”

It referred to Sri Lanka’s announcement of defaulting on its $51 billion external debt.

The Fund is one of the entities that lend to the Sri Lankan government, which has defaulted on five of the 16 loans the KFAED has provided.

It announced on Twitter giving Sri Lanka 16 loans with a total value of about 87 million Kuwaiti dinars to finance projects in various sectors.

“Sri Lanka has so far withdrawn about 68 million Kuwaiti dinars ($285 million), of which about 39 million Kuwaiti dinars ($127.8 million) were repaid. That is equivalent to 57% of the total withdrawn amount,” it explained in a tweet.

According to the KFAED, in case the state announces a default in payment, the loan agreements concluded with the borrower (the state) ensure the Fund’s rights are preserved, given that sovereign debts cannot be canceled.

Sri Lanka announced a default on its $51 billion foreign debt Tuesday as the island nation grapples with its worst economic crisis in memory and escalating protests demanding the government’s resignation.

Acute food and fuel shortages, as well as long daily electricity blackouts, have brought widespread suffering to the country’s 22 million people in the most painful downturn since independence in 1948.

The government has struggled to service foreign loans, and Tuesday’s decision comes ahead of negotiations for an International Monetary Fund bailout aimed at preventing a more catastrophic hard default that would see Sri Lanka completely repudiate its debts.

“We have lost the ability to repay foreign debt,” Sri Lanka’s Central Bank Governor Nandalal Weerasinghe told reporters in Colombo.

“This is a pre-emptive negotiated default. We have announced (it) to the creditors.”

Just under half of Sri Lanka’s debt is market borrowings through international sovereign bonds.

China is Sri Lanka’s largest bilateral lender and owns about 10 percent of the island’s foreign debt, followed by Japan and India.

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OPEC Again Cuts 2024, 2025 Oil Demand Growth Forecasts

The OPEC logo. Reuters
The OPEC logo. Reuters
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OPEC Again Cuts 2024, 2025 Oil Demand Growth Forecasts

The OPEC logo. Reuters
The OPEC logo. Reuters

OPEC cut its forecast for global oil demand growth this year and next on Tuesday, highlighting weakness in China, India and other regions, marking the producer group's fourth consecutive downward revision in the 2024 outlook.

The weaker outlook highlights the challenge facing OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies such as Russia, which earlier this month postponed a plan to start raising output in December against a backdrop of falling prices.

In a monthly report on Tuesday, OPEC said world oil demand would rise by 1.82 million barrels per day in 2024, down from growth of 1.93 million bpd forecast last month. Until August, OPEC had kept the outlook unchanged since its first forecast in July 2023.

In the report, OPEC also cut its 2025 global demand growth estimate to 1.54 million bpd from 1.64 million bpd, Reuters.

China accounted for the bulk of the 2024 downgrade. OPEC trimmed its Chinese growth forecast to 450,000 bpd from 580,000 bpd and said diesel use in September fell year-on-year for a seventh consecutive month.

"Diesel has been under pressure from a slowdown in construction amid weak manufacturing activity, combined with the ongoing deployment of LNG-fuelled trucks," OPEC said with reference to China.

Oil pared gains after the report was issued, with Brent crude trading below $73 a barrel.

Forecasts on the strength of demand growth in 2024 vary widely, partly due to differences over demand from China and the pace of the world's switch to cleaner fuels.

OPEC is still at the top of industry estimates and has a long way to go to match the International Energy Agency's far lower view.

The IEA, which represents industrialised countries, sees demand growth of 860,000 bpd in 2024. The agency is scheduled to update its figures on Thursday.

- OUTPUT RISES

OPEC+ has implemented a series of output cuts since late 2022 to support prices, most of which are in place until the end of 2025.

The group was to start unwinding the most recent layer of cuts of 2.2 million bpd from December but said on Nov. 3 it will delay the plan for a month, as weak demand and rising supply outside the group maintain downward pressure on the market.

OPEC's output is also rising, the report showed, with Libyan production rebounding after being cut by unrest. OPEC+ pumped 40.34 million bpd in October, up 215,000 bpd from September. Iraq cut output to 4.07 million bpd, closer to its 4 million bpd quota.

As well as Iraq, OPEC has named Russia and Kazakhstan as among the OPEC+ countries which pumped above quotas.

Russia's output edged up in October by 9,000 bpd to about 9.01 million bpd, OPEC said, slightly above its quota.