Sri Lanka's economy has collapsed, says PM

COLOMBO • Sri Lanka's economy has "completely collapsed", and an agreement with the International Monetary Fund (IMF) is the only path to revival, Prime Minister Ranil Wickremesinghe told Parliament on Wednesday.

"We are now facing a far more serious situation beyond mere shortages of fuel, gas, electricity and food," Mr Wickremesinghe said, adding that the South Asian nation is unable to purchase imported fuel, even for cash, due to heavy debts owed by its petroleum corporation.

"We are now seeing signs of a possible fall to rock bottom," he said.

The gloomy analysis came as the authorities held talks with the IMF on an agreement for fresh funds for the bankrupt nation.

Sri Lanka needs US$6 billion (S$8.3 billion) in the coming months to prop up its reserves, pay for ballooning import bills and stabilise its currency.

The government has concluded the initial discussions with the IMF, and exchanged ideas on public finance, debt sustainability, the banking sector and social security, Mr Wickremesinghe said.

"We intend to enter into an official-level agreement with the IMF by the end of July," he added.

Sri Lanka has failed to halt the worst economic crisis in its independent history.

Lingering shortages of food, fuel and essentials risk intensifying protests and may hamper political stability further.

Indian Foreign Secretary Vinay Kwatra held talks with Mr Wickremesinghe yesterday, as Delhi signalled its willingness to go beyond the US$4 billion in loans, swaps and aid that it has already provided to its cash-strapped neighbour.

Sri Lanka is facing a severe foreign exchange shortage, which is hampering the import of essentials including food, fuel and medicines.

BLOOMBERG, REUTERS

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A version of this article appeared in the print edition of The Straits Times on June 24, 2022, with the headline Sri Lanka's economy has collapsed, says PM. Subscribe