World · June 22, 2022

Sri Lanka’s economy has “completely collapsed”, says Prime Minister Ranil Wickremesinghe

Sri Lanka’s prime minister says its debt-laden economy has “collapsed” after months of shortages of food, fuel and electricity, and the South Asian island nation cannot even buy imported oil.
“We are now facing a much more serious situation beyond the simple shortage of fuel, gas, electricity and food. Our economy has completely collapsed. This is the most serious problem facing us today,” the prime minister told Parliament. Ranil Wickremesinghe.

Wickremesinghe is also the finance minister tasked with stabilizing the economy, which is reeling under the weight of heavy debt, lost tourism revenue and other impacts from the pandemic and rising commodity costs.

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“Currently, the Ceylon Petroleum Corporation has a debt of $ 700 million ($ A1 billion),” he told lawmakers. “Consequently, no country or organization in the world is willing to supply us with fuel. They are even reluctant to provide fuel for cash,” she said.
Sri Lanka will call China, India and Japan to a donor conference to gather more foreign assistance and present an interim budget in August, Wickremesinghe said Wednesday, during ongoing negotiations with the International Monetary Fund (IMF).
The island nation of 22 million is struggling with the worst economic crisis of the past seven decades, unable to import basic necessities including food, fuel and medicines due to severe foreign exchange shortages.
An interim budget will be presented in August, aimed at putting public finances on a more sustainable path and increasing funding for the poorest affected, Wickremesinghe said.
“The interim budget will set the way forward. This, coupled with an IMF program and debt sustainability, will set the stage for Sri Lanka’s return to economic stability,” he said.

In late May, Wickremesinghe told Reuters it would present a provisional budget within six weeks, cutting public spending “to the bone.”

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The shortage of basic necessities and the spiral of inflation have stroked the public unrest, prompting the Wickremesinghe government to redouble its efforts to bring in the assistance of the likes of the IMF and friendly countries.
“We need the support of India, Japan and China, which have been historic allies. We plan to convene a donor conference involving these countries to find solutions to the Sri Lankan crisis,” Wickremesinghe told Parliament.
“We will also seek help from the United States,” he said, adding that his administration will use $ 70 million from the World Bank to purchase cooking gas, which has been scarce, sparking sporadic protests.
A high-level delegation from India will arrive Thursday for talks on further support from New Delhi and a US Treasury team will visit next week, Wickremesinghe said.

India has provided approximately $ 4 billion in assistance so far, the prime minister said, including a $ 400 million exchange and lines of credit totaling $ 1.5 billion.

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China, which traditionally clashed with New Delhi over influence on the Indian Ocean island, is considering an appeal from Sri Lanka to renegotiate the terms of a $ 1.5 billion yuan-denominated exchange for finance essential imports.
Wickremesinghe said the government did not act in time to reverse the situation as Sri Lanka’s foreign reserves dwindled.
“If steps had been taken to slow the collapse of the economy at least in the beginning, we would not be faced with this predicament today. But we have missed this opportunity. Now we are seeing signs of a possible drop to the bottom,” he said. said.
The government also delayed the release of first-quarter GDP data, scheduled for Wednesday, because its census and statistics department did not receive all the required inputs in time, an official said.

“We are working to get the growth numbers as soon as possible, but it will probably take a few days due to delays and staff shortages,” said Anura Kumara, director general of the Department of Census and Statistics.