Sri Lanka PM says economy 'has collapsed,' unable to buy oil
Sri Lanka's debt-laden economy has
"collapsed" after months of shortages of food, fuel and electricity,
its prime minister told lawmakers Wednesday, in comments underscoring the
country's dire situation as it seeks help from international lenders.
Prime Minister Ranil Wickremesinghe told
Parliament the South Asian country is "facing a far more serious situation
beyond the mere shortages of fuel, gas, electricity and food. Our economy has
completely collapsed."
While Sri Lanka's crisis is considered its
worst in recent memory, Wickremesinghe's assertion that the economy has
collapsed did not cite any specific new developments. It appeared intended to
emphasize to his critics and opposition lawmakers that he has inherited a
difficult task that can't be fixed quickly, as the economy founders under the
weight of heavy debts, lost tourism revenue and other impacts from the
pandemic, as well as surging costs for commodities.
Lawmakers of the country's two main
opposition parties are boycotting Parliament this week to protest against
Wickremesinghe, who became prime minister just over a month ago and is also
finance minister, for not having delivered on his pledges to turn the economy
around.
Wickremesinghe said Sri Lanka is unable to
purchase imported fuel, even for cash, due to heavy debt owed by its petroleum
corporation.
"Currently, the 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 fuel to
us. 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
step down. In his comments Wednesday, he blamed the previous government for
failing to act in time as Sri Lanka's foreign reserves dwindled.
The foreign currency crisis has crimped
imports, creating severe shortages of food, fuel, electricity and other
essentials such as medicines, forcing people to stand in long lines to obtain
basic needs.
"If steps had at least been taken to
slow down the collapse of the economy at the beginning, we would not be facing
this difficult situation today. But we lost out on this opportunity. We are now
seeing signs of a possible fall to rock bottom," he said.
So far, Sri Lanka has been muddling through,
mainly supported by $4 billion in credit lines from neighboring India. But
Wickremesinghe said India would not be able to keep Sri Lanka afloat for long.
It also has received pledges of $300
million-$600 million from the World Bank to buy medicine and other essential
items.
Sri Lanka has already announced that it is
suspending repayment 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 until 2026.
Wickremesinghe said IMF assistance seems to
be the country's only option now. Officials from the agency 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 the initial
discussions and we have exchanged ideas on various sectors such as public
finance, finance, debt sustainability, stability of the banking sector and the
social security network," Wickremesighe said.
Representatives of financial and legal
advisers to the government on debt restructuring, Lazard and Clifford Chance,
are also visiting the island and a team from the U.S. Treasury will arrive next
week, he said.
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