Sri Lanka turned to bond markets that did not impose 'conditions' ahead of time like the World Bank and IMF and rapidly ratcheted up commercial borrowings.
Borrowings now include about 2.
5 billion US dollars worth rupee debt and a similar amount of dollar denominated debt.
While dollar denominated debt can only be sold to buyers with dollars, and become a problem only at maturity, a run by rupee bond holders can push the domestic currency down and cause severe tightening in credit markets.
Coomaraswamy said the pain imposed by fleeing creditors on some other countries have been much worse than the adjustments required by multilateral lenders.
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In later 2008 Sri Lanka faced a severe crisis, triggered by a pullout of bond buyers and also s