June 8, 2022 11:10:06 am
Sri Lanka’s prime minister said Tuesday that the United Nations has arranged a worldwide appeal to help the island nation cope with critical shortages of food, fuel and medicines, but the projected funds barely scratch the surface of the $6 billion it needs to stay afloat over the next six months.
In a speech to Parliament, Prime Minister Ranil Wickremesinghe said the U.N. seeks to provide $48 million in assistance over a four-month period.
Wickremesinghe said it will be tough for the next three weeks to obtain some essentials and urged people to be united and patient, to use the scarce supplies as carefully as possible and avoid nonessential travel.
“Therefore, I urge all citizens to refrain from thinking about hoarding fuel and gas during this period. After those difficult three weeks, we will try to provide fuel and food without further disruptions. Negotiations are underway with various parties to ensure this happens,” Wickremesinghe said.
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Sri Lanka is nearly bankrupt, having suspended repayment of its foreign loans. Its foreign reserves are almost spent, which has limited imports and caused serious shortages of essential items including food, medicine, fuel and cooking gas.
It is due to repay $7 billion this year of the $25 billion in foreign loans it is scheduled to pay by 2026. Sri Lanka’s total foreign debt is $51 billion.
Authorities have started discussions with the International Monetary Fund for a bailout package, and Wickremesinghe said he asked the IMF to lead a conference to unite Sri Lanka’s lenders.
“Holding such a conference under the leadership of India, China and Japan will be a great strength to our country. China and Japan have different credit approaches. It is our hope that some consensus on lending approaches can be reached through such a conference,” Wickremesinghe said.
A decision last year to ban imported agrochemicals and make farming totally organic halved rice production during the main cultivating season, though the ban has since been withdrawn. A lack of funds to buy fertilizer threatens future yields, too, causing fears of a worsening food crisis.
Wickremesinghe said chemical fertilizer imports cost $600 million a year and $150 million will be needed to import food each month. Another $1 billion will be required to strengthen the local currency, and in all, Sri Lanka will need about $6 billion to stay afloat for the next six months, he said.
“The task of rebuilding our declining agriculture must begin immediately. We are losing the international market for our export crops. Action must be taken to prevent this. Chemical fertilizers are needed to boost local agriculture,” he said.
Wickremesinghe said that before he took over as prime minister last month, the government had alienated Sri Lanka’s long-time allies.
“Japan is our long-time friend. A nation that has helped our country greatly. But they are now unhappy with us due to the unfortunate events of the past, “Wickremesinghe said. “Our country failed to formally notify Japan of the suspension of certain projects. Sometimes the reasons for these suspensions were not even stated.”
Sri Lanka cancelled and reinstated a port development project with India and Japan multiple times in the years following their initial 2019 agreement.
“Despite alienating these friendly nations, India offered to help us in the face of the growing crisis. We express our respect and gratitude to them during this difficult time. We are also working to re-establish old friendships with Japan,” he said.
India has provided billions of dollars in help to Sri Lanka through loans and credit lines since the crisis started.
Sri Lankan Foreign Employment Minister Manusha Nanayakkara said the government plans to send part of its bloated state workforce to work overseas to earn much-needed foreign currency. He said the health ministry is also formulating laws to help state health workers seek foreign jobs.
Remittances from overseas workers have been one of Sri Lanka’s main economic lifelines, along with garment exports and tourism, but that income has drastically declined because authorities artificially maintained the value of the U.S. dollar and made the conversion of foreign money into local currency compulsory, leading many to use illegal channels to transfer funds.
Nanayakkara said Sri Lanka typically received $700 million a month in remittances from expatriate workers, but the figure dropped to $230 million in March.
The economic crisis has led to political turmoil. Protesters have been camped outside the president’s office for more than 50 days calling for the resignation of President Gotabaya Rajapaksa, whom they accuse of being responsible for the crisis.
Protests have almost dismantled the once-powerful Rajapaksa political dynasty, with the president’s brother resigning as prime minister last month amid violent protests. Three other family members resigned from Cabinet positions earlier this year.
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