By Alexander Lee

Women wait in a queue to buy kerosene in in Colombo, Sri Lanka, Saturday, June 11, 2022.

Sri Lanka's economy is in a state of collapse, Prime Minister Ranil Wickremesinghe announced to lawmakers on Wednesday, highlighting the severity of the country's situation amidst ongoing shortages of essential resources such as food, fuel, and electricity.

Wickremesinghe explained that the South Asian nation is grappling with more than just the shortages; it is dealing with the total collapse of its economy, weighed down by heavy debts, lost tourism revenue from the pandemic, and the soaring costs of commodities.

His statement comes as Sri Lanka experiences its worst economic crisis in recent memory, with the country seeking aid from international lenders. Wickremesinghe took office just over a month ago, after violent protests forced his predecessor to resign.

Sri Lanka's two main opposition parties are currently boycotting Parliament in protest against Wickremesinghe, accusing him of failing to deliver on promises to revive the economy.

Sri Lanka's economic woes have been exacerbated by its inability to purchase imported fuel due to the heavy debt owed by its petroleum corporation. "Currently, the Ceylon Petroleum Corporation is $700 million in debt," Wickremesinghe told lawmakers, adding that "no country or organization in the world is willing to provide fuel to us. They are even reluctant to provide fuel for cash."

So far, Sri Lanka has relied on $4 billion in credit lines from India, as well as pledges from the World Bank amounting to $300 million-$600 million for purchasing essential items like medicine. The country has also suspended repayment of $7 billion in foreign debt due this year, pending the outcome of negotiations with the International Monetary Fund (IMF) for a rescue package.

Wickremesinghe revealed that initial discussions with the IMF have taken place, with a staff-level agreement expected to be reached by the end of July. Additionally, representatives from Lazard and Clifford Chance, financial and legal advisers to the government on debt restructuring, are visiting the island, and a team from the U.S. Treasury is expected to arrive next week.

Reporter Alexander Lee alexanderlee_24@newsyn.co.kr