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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“Sri Lanka has so far withdrawn about 68 million Kuwaiti dinars ($285 million), of which about 39 million Kuwaiti dinars ($127.8 million) were repaid. That is equivalent to 57% of the total withdrawn amount,” it explained in a tweet.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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Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
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Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)

Business activity in Saudi Arabia's non-oil sector accelerated to a four-month high in September, driven by strong demand, which led to faster growth in new orders. The Riyad Bank Saudi Arabia Purchasing Managers' Index (PMI), adjusted for seasonal factors, rose to 56.3 points from 54.8 in August, marking the highest reading since May and further distancing itself from the 50.0 level that indicates growth.

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders, alongside challenges in supply. The improvement in business conditions contributed to a significant rise in employment opportunities, although difficulties in finding skilled workers led to a shortage in production capacity.

At the same time, concerns over increasing competition caused a decline in future output expectations. According to the PMI statement, inventories of production inputs remained in good condition, which encouraged some companies to reduce their purchasing efforts.

Growth was strong overall and widespread across all non-oil sectors under study. Dr. Naif Al-Ghaith, Senior Economist at Riyad Bank, said that the rise in Saudi Arabia's PMI points to a notable acceleration in the growth of the non-oil private sector, primarily driven by increased production and new orders, reflecting the sector’s expansionary activity.

Al-Ghaith added that companies responded to the rise in domestic demand, which plays a crucial role in reducing the Kingdom's reliance on oil revenues. The upward trend also indicates improved business confidence, pointing to a healthy environment for increased investment, job creation, and overall economic stability.

He emphasized that this growth in the non-oil sector is particularly important given the current context of reduced oil production and falling global oil prices. With oil revenues under pressure, the strong performance of the non-oil private sector acts as a buffer, helping mitigate the potential impact on the country's economic conditions.

Al-Ghaith continued, noting that diversifying income sources is essential to maintaining growth amid the volatility of oil markets. He explained that increased production levels not only enhance the competitiveness of Saudi companies but also encourage developments aimed at expanding the private sector's participation in the economy.

This shift, he said, provides a more stable foundation for long-term growth, making the economy less susceptible to oil price fluctuations.