Sri Lanka’s president said Wednesday that his government was in discussions with the International Monetary Fund, other agencies, and countries on deferring loan repayments and requested people’s support by limiting electricity and fuel consumption to cope with the worst economic crisis in memory.
President Gotabaya Rajapaksa in his televised address asked the nation not to be discouraged but to have faith in his steps to salvage the situation. His appeal comes amid widespread public anger at the severe shortages of essential goods including medicine, cooking gas, fuel, and daily power cuts.
He said the government has initiated talks with international financial institutions and “friendly countries regarding repayment of our loan installments.”
“Yesterday’s discussion with the International Monetary Fund was also held for this purpose,” he said.
His government’s decision to deal with the IMF marks a policy shift after it had resisted calls from experts and politicians to seek the agency’s help. It had argued that asking international financial institutions for assistance could bring along conditions detrimental to the country’s interests.
Sri Lanka’s usable foreign reserves are said to be less than $400 million, according to experts, and it has nearly $7 billion in foreign debt obligations for this year.
The dollar shortage has led to authorities struggling to pay for shiploads of fuel, cooking gas, and food items docked at Colombo port. At the same time, people and vehicles were forming long lines near gas stations and cooking gas dealers for hours.
Finance Minister Basil Rajapaksa, who is also the president’s brother, is currently in India, where he is expected finalize a $1 billion credit line to buy essential supplies.
President Rajapaksa said that along with his decision to free float the local currency and positive signs about a revival of tourism and exports after a respite in the COVID-19 pandemic, he expects a better inflow of foreign currency and hopes the deficit can be managed at around $2.4 billion this year.
Rajapaksa said fuel makes up about 20 percent of Sri Lanka’s total imports. Recent sharp rises in fuel prices were the result of the increase of crude oil prices globally, he said.
“Therefore, by limiting the use of fuel and electricity as much as possible, the citizens too can extend their support to the country at this time. I hope that you will understand the responsibility lies with you at this challenging time,” he said.
Political parties and citizen groups have launched protests around the country, accusing the government of being responsible for the economic crunch. The main opposition party in Sri Lanka’s Parliament held a demonstration near the president’s office on Tuesday demanding Rajapaksa’s resignation.