Women line up to buy kerosene in Colombo, Sri Lanka on June 11, 2022.

Eranga Jayawardena/AP

hide caption

toggle caption

Eranga Jayawardena/AP

Women line up to buy kerosene in Colombo, Sri Lanka on June 11, 2022.

Eranga Jayawardena/AP

COLOMBO, Sri Lanka – Sri Lanka’s economy has “collapsed” after months of food, fuel and power shortages, the prime minister told lawmakers on Wednesday in comments highlighting the country’s dire situation then. that he is seeking help from international lenders.

Ranil Wickremesinghe told parliament the South Asian nation faced “a much more serious situation” than just shortages, and he warned of “a possible bottoming out”.

“Our economy has completely collapsed,” he said.

The crisis on the island of 22 million people is considered the worst in recent memory, but Wickremesinghe did not cite any specific new developments. His comments seemed intended to underscore to critics and opposition lawmakers that he inherited a difficult task that cannot be resolved quickly.

“He’s setting really, really low expectations,” said Anit Mukherjee, a policy researcher and economist at the Center for Global Development in Washington.

Wickremesinghe’s remarks also sent a message to potential lenders: “You cannot let a country of such strategic importance collapse,” said Mukherjee, who noted that Sri Lanka sits on one of the busiest shipping lanes in the world.

Sri Lanka’s economy is collapsing under the weight of heavy debt, loss of tourism revenue and other effects of the pandemic, as well as soaring commodity prices. The result is a country hurtling towards bankruptcy, with very little money to import petrol, milk, cooking gas and toilet paper.

Lawmakers from the two main opposition parties are boycotting parliament this week to protest Wickremesinghe, who became prime minister just over a month ago and is also finance minister, for failing to deliver on promises to redress the economy.

Wickremesinghe said Sri Lanka was unable to buy imported fuel due to its oil company’s heavy debt.

The Ceylon Petroleum Corporation is $700 million in debt, he told lawmakers. “As a result, no country or organization in the world is willing to provide us with fuel. They are even reluctant to provide fuel for cash.”

The crisis has started to affect the Sri Lankan middle class, estimated at 15 to 20% of the country’s urban population. The middle class began to swell in the 1970s after the economy opened up to more trade and investment. It has continued to grow ever since.

Until recently, middle-class families generally enjoyed economic security. Now those who have never had to think twice about fuel or food are struggling to manage three meals a day.

“They’ve really been shaken up like never before in the last three decades,” said Bhavani Fonseka, senior fellow at the Center for Policy Alternatives in Colombo, Sri Lanka’s capital.

“If the middle class is struggling like this, imagine how hard the most vulnerable are hit,” Fonseka added.

The situation has derailed years of progress towards the relatively comfortable lifestyles to which all of South Asia aspired.

Government officials have been off every Friday for three months to save fuel and grow their own fruits and vegetables. The food inflation rate is 57%, according to official data.

Wickremesinghe took office after days of violent protests over the country’s economic crisis that forced his predecessor to resign. On Wednesday, he blamed the previous government for failing to act in time as Sri Lanka’s foreign exchange reserves dwindled.

The foreign currency crisis has reduced imports, creating severe shortages which also include medicines and forcing people to queue for basic needs.

“If at least steps had been taken to slow the collapse of the economy at the start, we would not be facing this predicament today. But we have missed this opportunity. We are now seeing signs of a possible drop to rock bottom,” he said.

So far, Sri Lanka has gotten its way, mainly backed by $4 billion in credit lines from neighboring India. But Wickremesinghe said India would not be able to keep Sri Lanka afloat for long.

It has also received pledges of $300 million to $600 million from the World Bank to buy medicines and other essentials.

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

Wickremesinghe said IMF assistance appears to be the country’s only option now. Agency officials are visiting Sri Lanka to discuss the idea. A personnel agreement should be concluded by the end of July.

“We concluded the initial discussions and we exchanged ideas on various sectors,” Wickremesighe said.

Representatives of the government’s financial and legal advisers on debt restructuring are also visiting the island, and a team from the US Treasury will arrive next week, he said.

___

Krutika Pathi and Bharatha Mallawarachi in Colombo and Paul Wiseman in Washington contributed to this report.