According to a rating agency, Sri Lanka’s debt default has commenced.

Two of the world’s top credit rating agencies have warned that Sri Lanka is set to default on its loans.

Fitch Ratings downgraded the South Asian country, stating that “a sovereign default process has begun.”

A similar statement was issued, stating that a default is now a “virtual certainty.”

Sri Lanka said this week that it will temporarily default on its international obligations as it grapples with its greatest economic crisis in over 70 years.

In the meantime, officials have asked Sri Lankans working overseas to bring money home in the face of large protests over significant power outages and rising food and fuel prices.

On Wednesday, the country’s new central bank governor requested donations in sterling, US dollars, and euros.

“The cash will only be utilised to import necessities like food, gasoline, and medicine,” he stressed.

Sri Lanka is expected to pay $78 million (£59.4 million) in interest on its international sovereign bonds on Monday. If the payment is not made during the 30-day grace period, the country will default on its foreign debt for the first time since its independence from the United Kingdom in 1948.

Sri Lanka was also downgraded by S&P, citing the “virtual inevitability of a default on some concerned commitments.”

The rating agency said it needed additional information about Sri Lanka’s debt restructuring plan, as well as confirmation that the government had failed to pay its creditors.

Credit ratings are designed to help investors understand the level of risk they are taking on when purchasing a financial instrument; in this case, a sovereign bond.

The Sri Lankan government announced on Tuesday that it would temporarily default on $35.5 billion in foreign debt.

According to the country’s finance ministry, the impact of the pandemic and the war in Ukraine made it “difficult” to pay its creditors.

Next week, the country will begin talks with the International Monetary Fund (IMF) on a loan package to help it get its economy back on track.

It depreciated its currency sharply last month in preparation for negotiations with the IMF about a bailout.