Sri Lankan PM says economy ‘collapsed’ and can’t buy oil

Colombo, Sri Lanka — Sri Lanka’s debt-ridden economy has “collapsed” after months of food, fuel and electricity shortages, its prime minister told lawmakers on Wednesday, in comments underscoring the country’s dire situation as it seeks help from governments. international lenders.

Prime Minister Ranil Wickremesinghe told parliament that the South Asian country “faces a much more serious situation than just shortages of fuel, gas, electricity and food. Our economy has completely collapsed.”

Sri Lankan crisis
Women queue to buy kerosene in Colombo, Sri Lanka, on Saturday, June 11, 2022. Sri Lanka’s economic crisis, the worst in its history, has turned life upside down for the country’s once runaway middle class.

Eranga Jayawardena/AP

While the Sri Lankan crisis is considered the worst in recent history, Wickremesinghe’s claim that the economy has collapsed does not cite any specific new developments. He seemed intended to emphasize to his critics and opposition lawmakers that he inherited a difficult task that cannot be fixed quickly, as the economy sinks under the weight of heavy debts, loss of tourism revenue and other shocks from the pandemic, as well as increased costs of basic products.

Lawmakers from the country’s two main opposition parties are boycotting Parliament this week to protest Wickremesinghe, who became prime minister just over a month ago and is also finance minister, for failing to deliver on his promises to change the economy.

Wickremesinghe said Sri Lanka is unable to buy imported fuel, even in cash, due to its oil corporation’s heavy debt.

“Currently, Ceylon Petroleum Corporation is $700 million in debt,” he told lawmakers. “As a result, no country or organization in the world is willing to provide us with fuel. They are even reluctant to provide fuel for cash.”

Wickremesinghe took office after days of violent protests over the country’s economic crisis forced his predecessor to resign. In his remarks on Wednesday, he blamed the previous government for not acting in time as Sri Lanka’s foreign exchange reserves dwindled.

The currency crisis has curbed imports, creating severe shortages of food, fuel, electricity and other essentials such as medicine, forcing people to stand in long lines to get basic necessities.

“If measures had at least been taken to stop the collapse of the economy at the beginning, we would not be facing this difficult situation today. But we missed this opportunity. Now we are seeing signs of a possible fall to the bottom.” ,” he said.

So far, Sri Lanka has been muffling along, supported mainly by $4bn in credit lines from neighboring India. But Wickremesinghe said India would not be able to keep Sri Lanka afloat for long.

It has also received pledges of $300 million to $600 million from the World Bank to buy medicines and other essential items.

Sri Lanka has already announced that it will suspend payment of $7 billion in foreign debt due this year, pending the outcome of negotiations with the International Monetary Fund on a rescue package. It must pay $5 billion on average annually through 2026.

Wickremesinghe said IMF assistance appears to be the country’s only option now. Agency officials are visiting Sri Lanka to discuss a rescue package. A staff-level agreement is likely to be reached by the end of July.

“We have concluded initial discussions and exchanged ideas on various sectors such as public finance, finance, debt sustainability, banking sector stability and the social safety net,” Wickremesighe said.

Representatives of the government’s financial and legal advisers on debt restructuring, Lazard and Clifford Chance, are also visiting the island and a team from the US Treasury will arrive next week, he said.

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