Sri Lanka's debt-laden economy has "completely collapsed" after months of shortages of food, fuel, and electricity, its prime minister told lawmakers Wednesday, in comments underscoring the country's dire situation as it seeks help from international lenders. While Sri Lanka's crisis is considered its worst in recent memory, Prime Minister Ranil Wickremesinghe's assertion that the economy has collapsed did not cite any specific new developments, notes the AP. It appeared intended to emphasize to his critics and opposition lawmakers that he has inherited a difficult task that can’t be fixed quickly; he became prime minister just over a month ago and has not yet delivered on his pledges to turn the economy around.
Wickremesinghe said Sri Lanka is unable to purchase imported fuel, 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 willing to provide fuel to us." The Wall Street Journal reports schools and nonessential government services have been shuttered for two weeks due to the fuel shortage. So far, Sri Lanka has been muddling through, mainly supported by $4 billion in credit lines from neighboring India. But Wickremesinghe said India would not be able to keep Sri Lanka afloat for long.
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 rescue package—which Wickremesinghe characterized as the country's only option. Officials from the agency are visiting Sri Lanka to discuss a rescue package. As for the root cause of Sri Lanka's financial woes, the Journal notes the government has pointed a finger at the pandemic and the war in Ukraine's impact on tourism and commodity prices. Economists, however, fault tax cuts that cut sharply into government funds and debt amassed through infrastructure spending. (Read more Sri Lanka stories.)