Sri Lanka restores order but economy on brink of collapse

COLOMBO • Sri Lanka's economy will "collapse" unless a new government is urgently appointed, the central bank chief has warned, as security forces fanned out on the streets to restore order after spasms of mob violence.

Police say nine people have died since Monday, when frustration at a dire economic crisis erupted into clashes between backers and opponents of President Gotabaya Rajapaksa, injuring more than 200.

Opposition parties have refused Mr Rajapaksa's overtures for a unity government to resolve a political deadlock and instead demanded his resignation.

Central bank governor Nandalal Weerasinghe said it was critical that a new administration take charge by tomorrow or the country would suffer a catastrophe.

"The economy will completely collapse and no one will be able to save it," he told reporters.

"The country was fast going down a slope when I took over just over a month ago. I thought we were able to apply the brakes, but with the events of Monday the brakes no longer work."

Shortly after taking over as the bank's chief in April, Mr Weerasinghe announced a default on Sri Lanka's US$51 billion (S$70 billion) external debt, saying the country had no money to pay its creditors.

He said political stability was vital to implement the reforms needed to address Sri Lanka's snowballing debt crisis and the acute shortage of foreign exchange to import essentials.

Security forces have largely curbed public disorder after they were deployed to enforce a nationwide curfew with orders to "shoot on sight" anyone engaged in looting or violence.

"If the situation is not brought under control, there could be total anarchy," a senior security official told Agence France-Presse (AFP) on condition of anonymity.

The capital Colombo was almost deserted yesterday, aside from soldiers manning checkpoints near the charred remains of buses that had been set alight by anti-government crowds.

With armoured personnel carriers on the streets and a heavy security presence, Sri Lanka's military chief addressed a press conference to deny speculation of a looming coup.

"Don't ever think that we are trying to capture power," said Mr Kamal Gunaratne, secretary of Sri Lanka's Defence Ministry. "The military has no such intentions."

A small crowd continued to defy the curfew near the president's seafront office, where a protest camp has for the past month maintained a vigil calling on him to step down.

"We want the whole Rajapaksa clan out because they are so, so corrupt. They have been eating into Sri Lanka like a caterpillar eating into some fruit," activist Kaushalya Fernando told AFP.

In a tweet, Mr Rajapaksa yesterday called for "all Sri Lankans to join hands as one, to overcome the economic, social & political challenges".

Sri Lanka's crisis moved into a darker phase on Monday when government supporters with sticks and clubs attacked demonstrators who had been protesting peacefully for weeks, demanding the President's resignation.

Mobs then retaliated across the country, torching dozens of homes of ruling-party politicians.

Mr Mahinda Rajapaksa, the president's brother who resigned as prime minister on Monday, had to be rescued in a pre-dawn military operation on Tuesday and was taken to a naval dockyard for his safety after protesters tried to storm his official residence.

The International Monetary Fund (IMF) this week began a "virtual mission" of staff-level talks on a possible bailout for Sri Lanka.

IMF mission chief Masahiro Nozaki said the lender aimed to be "fully prepared for policy discussions once a new government has been formed".

AGENCE FRANCE-PRESSE