Sri Lanka has run out of gasoline and the country’s finances are “extremely precarious,” its new prime minister said on May 16.
The cash-strapped government urgently needs $75 million in foreign exchange to pay for essential imports within the next couple of days, Prime Minister Ranil Wickremesinghe said.
“At present, the Sri Lankan economy is extremely precarious,” Wickremesinghe said in a televised address. “The next couple of months will be the most difficult ones of our lives.
“We must prepare ourselves to make some sacrifices and face the challenges of this period.”
Wickremesinghe said that three shipments of crude oil and furnace oil “have been anchored within the maritime zone of Sri Lanka” because the government was unable to raise dollars to pay for them.
“At present, the central bank, local and private banks, and foreign banks functioning in Sri Lanka are all facing a dollar shortage. As [the public] is already aware, we possess a very low amount of U.S. dollars,” he said.
While shipments of diesel and gasoline using the Indian credit line may provide relief in the coming days, Wickremesinghe warned that Sri Lanka could see power outages lasting up to 15 hours a day.
The country also faces a severe shortage of medicines and surgical equipment, particularly heart disease medication and anti-rabies vaccine. Sri Lanka currently owes 34 billion Sri Lankan rupees ($94 million) to pharmaceutical suppliers.
The central bank will have to print money to pay the wages of the state-sector employees, although Wickremesinghe cautioned that doing so would cause the currency to depreciate.
He also proposed privatizing the Sri Lankan Airlines.
Men on a scooter ride past burned buses near Sri Lanka’s former prime minister Mahinda Rajapaksa’s official residence, a day after they were torched by protesters in Colombo on May 10, 2022. (Ishara S. Kodikara/AFP via Getty Images)Wickremesinghe was appointed prime minister on May 12 after violent protests led to the resignation of Mahinda Rajapaksa, the brother of sitting President Gotabaya Rajapaksa.
At least nine people died and 219 others were injured after ruling-party supporters attacked anti-government protesters on May 9. Armed troops are now authorized to shoot anyone seen looting public property or causing damage.
A police spokesperson said on May 15 that 230 people were arrested for violating curfew, attacking the public, and causing damage. Of those, 68 people have been remanded in custody.
China’s Role in Sri Lanka’s Crisis
Sri Lanka is a key part of the Chinese Belt and Road Initiative (BRI), which other countries have criticized as a “debt trap” for smaller nations. Several of its infrastructure projects funded by foreign investments have failed to bring revenue, plunging the country into debt.
In December 2017, the Sri Lankan government leased the key port of Hambantota to China for 99 years to convert its owed loans of $1.4 billion into equity. The move led thousands to rally in protest against the deal.
Sri Lankan member of Parliament Harsha de Silva said on May 15 that the government had no choice but to “figure out a way to come out of the debt” accumulated from the infrastructural projects.
“We can’t undo the projects now. What we can do now is to figure out a way to come out of the debt. We have to restructure it, and we have to talk to the Chinese and come to a solution,” Silva was quoted as saying by India Today.
About 10 percent of Sri Lanka’s $51 billion external debt is owed to China. Sri Lanka had requested help from China to restructure its debt obligations and $2.5 billion in financial support. In May, the Sri Lankan government said Beijing extended a total aid package of 500 million yuan ($76 million).