Sri Lanka needs billions as it exhausts financing

People line up for fuel in Colombo on May 17. Sri Lanka's monthly fuel bill alone amounts to about US$500 million. PHOTO: NYTIMES

COLOMBO (NYTIMES) - Sri Lanka needs US$6 billion (S$8.4 billion) until the end of the year to buy fuel and other essential goods to stabilise its crumbling economy.

The question is where that money will come from.

One of its most steadfast patrons, India, has provided US$4 billion in credit and loans, which Sri Lanka has burned through in recent months. In meetings held in Colombo, Indian officials have expressed willingness to keep supporting the country, but it is unclear just how much more India will do.

The situation has grown so desperate that Sri Lanka has asked Russian President Vladimir Putin for a credit line to buy fuel. Government delegations were even dispatched abroad to meet anyone who might be able to help, including charities in Qatar.

China, a long-time ally of the ruling Rajapaksa family, has largely kept a distance. In past years, China has bankrolled many of Sri Lanka's major infrastructure projects with loans.

Sri Lanka's monthly fuel bill alone amounts to about US$500 million. Officials have said that many of its traditional fuel suppliers are reluctant to sell to the country, as the state oil company is mired in debt it is struggling to pay off. In recent months, some suppliers have refused to unload fuel tankers docked at Sri Lankan ports until payment was made.

Fuel shipments from India occasionally ease the long lines at Sri Lankan petrol stations. But when supplies dwindle, the government has rationed fuel and tried to repress demand by ordering state employees to work from home, for example. The cooking gas shortage became so hopeless for a while that people stopped shopping for it, in some cases leaving their empty cylinders in the street, chaining them together to prevent theft.

Officials have appealed to foreign tourists to return to Sri Lanka's pristine beaches and lush mountains, hoping that desperately needed hard currency will trickle in. But the political turmoil, and the logistical nightmare of transport and electricity cuts, is making that appeal a hard sell.

The country is in negotiations with the International Monetary Fund (IMF) to restructure billions of dollars in foreign debt, on which it has defaulted. A new arrangement with the IMF, which could open doors to outside funding and aid, is months away, and the talks have been further complicated by the latest upheavals in the government.

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