Thursday 18, August 2022

Economic crisis in Sri Lanka: Fuel shortage set to ease

Says central bank governor after securing foreign exchange

Agencies: Sri Lanka's central bank has secured foreign exchange to pay for fuel and cooking gas shipments that will ease crippling shortages, its governor said yesterday, but police fired tear gas and water canon to push back student protesters.

Most of Sri Lanka's petrol stations have run dry as the island nation battles its most devastating economic crisis since independence in 1948. At some pumps in the commercial capital, Colombo, dozens of people stood in lines holding plastic jerry cans, as troops in combat gear and armed with assault rifles patrolled the streets. Traffic was extremely light.

Residents said most people were staying at home because of the lack of transport.

Hundreds of students carrying black flags marched on Colombo's central Fort area, chanting slogans against the government. Police fired repeated rounds of tear gas and water canon to push them back, according to a Reuters witness.

Central bank Governor P Nandalal Weerasinghe told a news conference adequate dollars had been released to pay for fuel and cooking gas shipments, utilising in part $130 million received from the World Bank and remittances from Sri Lankans working overseas.

He was speaking after the central bank held interest rates steady at a policy meeting, citing a massive 7 percentage point increase in April that it said was working its way through the system.

Sri Lanka has defaulted on its debt for the first time in its history. It comes after a 30-day grace period to repay $78m (£63m) of unpaid debt interest payments expired on Wednesday, reports BBC.

Weerasinghe said plans for a debt restructuring were almost finalised and he would be submitting a proposal to the cabinet soon.

"We are in pre-emptive default," he said. "Our position is very clear, until there is a debt restructure, we cannot repay."

The central bank said energy and utility prices needed to be urgently revised, and analysts said the prime minister's ability to push reforms through parliament and overcome public anger would be crucial.

The country was more politically and economically stable, Weerasinghe said, adding that he would stay on in his post.

He told reporters on May 11 that he would resign in two weeks in the absence of political stability as any steps the bank took to address the economic crisis would not be successful amid the turmoil.

Opposition parliamentarian Ranil Wickremesinghe was named prime minister last week and he has made four cabinet appointments. However, he has yet to name a finance minister.

Wickremesinghe, speaking in parliament, said the government was working to release six fuel shipments that had arrived at Colombo's port.

"There are two petrol shipments among them but this will not end the shortages," he said, adding that supplies had been locked in only until mid-June.

"Our aim now is to reduce the lines and find a way to start a fuel reserve so even if a couple of shipments are missed there is fuel available."

However, there is considerable opposition to him. Protesters agitating for the removal of the Rajapaksa brothers say he is their stooge.

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