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Saturday, December 10, 2022

Sri Lanka’s prime minister says economy ‘completely collapsed’

COLOMBO, Sri Lanka ( Associated Press) – Sri Lanka’s debt-ridden economy has ‘collapsed’ after months of food, fuel and electricity shortages, its prime minister told lawmakers on Wednesday in comments underlining the country’s dire situation while seeking help from international lenders search. .

Prime Minister Ranil Wickremesinghe told parliament that the South Asian country was facing a much more serious situation than the mere shortages of fuel, gas, electricity and food. Our economy has completely collapsed. ”

READ MORE: Sri Lankan army deploys to capital amid protests against government

While Sri Lanka’s crisis is considered the worst in recent memory, Wickremesinghe’s claim that the economy has collapsed has not mentioned any specific new developments. It was intended to emphasize to his critics and opposition legislators that he inherited a difficult task that could not be solved quickly, as the economy founders under the weight of heavy debt, lost tourism revenue and other impacts of the pandemic, as well as rising costs for commodities.

Lawmakers from the country’s two main opposition parties are boycotting Parliament this week to protest against Wickremesinghe, who became prime minister more than a month ago and is also finance minister for failing to deliver on his promises to turn the economy around. not.

Wickremesinghe said Sri Lanka is unable to buy imported fuel, not 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 prepared to supply us with fuel. 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 resign. In his comments on Wednesday, he blamed the previous government for not acting in a timely manner as Sri Lanka’s foreign reserves declined.

The foreign exchange crisis has shrunk imports, causing severe shortages of food, fuel, electricity and other necessities such as medicine, forcing people to stand in long queues to meet basic needs.

“If steps had at least been taken to slow down the collapse of the economy at the beginning, we would not have faced this difficult situation today. But we lost this opportunity. “We are now seeing signs of a possible drop to the bottom,” he said.

Sri Lanka has been messed up so far, mainly backed by $ 4 billion in credit lines from neighboring India. But Wickremesinghe said India would not be able to keep Sri Lanka going for long.

It also received $ 300 million- $ 600 million pledges from the World Bank to buy medicines and other essential items.

Sri Lanka has already announced that it is suspending the repayment of $ 7 billion in foreign debt owed this year, pending the outcome of negotiations with the International Monetary Fund over a bailout package. It should pay an average of $ 5 billion annually by 2026.

Wickremesinghe said IMF assistance was apparently the country’s only option. Agency officials visit Sri Lanka to discuss a rescue package. A staff level agreement is likely to be reached by the end of July.

“We completed the initial discussions and we exchanged ideas on various sectors such as public finance, finance, debt sustainability, banking sector stability 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 US Treasury will arrive next week, he said.

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