Sri Lanka has banned private vehicles from accessing fuel until July 10 as its government attempts to manage a severe shortage amid a worsening economic crisis.
The government announced on Monday night that it would also close schools in urban areas for two weeks and would only allow fuel supplies for essential purposes such as medical services, trains and some buses, as well as vehicles that transport food.
The nation of 22mn is going through its most severe debt and economic crisis in decades as a foreign exchange shortage has left the government unable to pay off its loans and import basics including food and medicine.
Mass protests have put President Gotabaya Rajapaksa under pressure to resign. Clashes broke out between supporters and opponents of the government in Colombo, the capital, and elsewhere in the country last month, leaving nine dead and about 300 people injured.
Sri Lanka defaulted on its overseas loans in May after missing interest payments on two $1.25bn sovereign bonds, becoming the first country in Asia-Pacific to do so in more than two decades.
On Monday, Bandula Gunawardana, the spokesperson for the cabinet, told reporters that the country would only issue fuel to services deemed essential until July 10. Everyone urged to work from home, he said. Inter-provincial bus services were also expected to be stopped.
“Sri Lanka has never faced such a severe economic crisis in its history,” Gunawardana said.
The national power regulator said daily power cuts of about two-and-a-half hours would rise to about three or four hours per day.
One man who works as a driver for tourists said he had queued for 48 hours for petrol late last week and was then only allowed to buy a ration worth SLRs20,000 ($56).
The government is in talks with the IMF about a potential bailout of about $3bn. An IMF team arrived in Sri Lanka last week, and the country has sought about $4bn of financial assistance from India and China to import essential items.
Sri Lanka has been Asia’s largest high-yield bond issuer and an enthusiastic participant in Beijing’s Belt and Road international infrastructure scheme. The country owes a total of more than $50bn to private bondholders and nations including China, India and Japan.
After the end of its civil war in 2009, Sri Lanka became a popular destination for bondholders looking for high-yielding investment opportunities and the ruling Rajapaksa family used debt-financed infrastructure projects to fuel growth.
The island defaulted on its debt after the coronavirus pandemic led to a sharp drop in tourism and due to what analysts said was economic mismanagement by Rajapaksa, who cut taxes and imposed a ban on chemical fertilisers that damaged agricultural production.
Source: Economy - ft.com
