April 26 (Reuters) - The Sri Lankan stock market shut early for a second straight day after a steep fall led by its biggest companies, as investors fled risky assets following a sharp rise in interest rates against the backdrop of an economic crisis in the country.

* The CSE All-Share index closed 8.1% lower at 6,905.37 on Tuesday and is down more than 40% this year.

* After two trading halts earlier in the session, the Colombo Stock Exchange said https://cdn.cse.lk/cmt/upload_cse_report_file/nVlWG920n0rVeoiL_26Apr2022060817GMT_1650953297744.pdf the market will be closed for the rest of the day following a 10% slump in the blue-chip S&P SL20 index. The market shut just half an hour into trading on Monday.

* The Central Bank of Sri Lanka earlier this month raised its key interest rates by an unprecedented 700 basis points to tame sky-high inflation amid shortages of basic goods in the heavily indebted country, after which the market was closed for two weeks.

* Sri Lanka must tighten monetary policy, raise tax and adopt flexible exchange rates to address its debt crisis, a senior International Monetary Fund official said on Tuesday.

* The island nation has begun discussions with China about refinancing its debt, according to a cabinet spokesman.

* Sri Lanka said earlier this month it had become "challenging and impossible" to repay external debt, leading to several ratings downgrades and outrage over the government's handling of the crisis.

* Heavyweight stocks John Keells Holdings, LOLC Holdings and Expolanka Holdings plunged between 7.9% and 20%.

* For a report on global markets, click (Reporting by Chris Thomas in Bengaluru; Editing by Shounak Dasgupta)