Sri Lanka is ‘bankrupt’, says Prime Minister Ranil Wickremesinghe

Wickremesinghe told lawmakers that negotiations with the International Monetary Fund (IMF) to revive the country’s ‘collapsed’ economy are ‘difficult’ as the 22 million South Asian country entered negotiations as a bankrupt country rather than as a developing country.

“We are now participating in the negotiations as a bankrupt country. Therefore, we are dealing with a more difficult and complicated situation than previous negotiations,” Wickremesinghe said in parliament.

“Due to the state of bankruptcy our country is in, we must separately submit a debt sustainability plan to the IMF,” he added. “Only when they are satisfied with that plan can we come to an agreement at the staff level. This is not an easy process.”

Sri Lanka is in the midst of its worst financial crisis in seven decades, after foreign exchange reserves plunge to record lows as dollars run out to pay for essential imports, including food, medicine and fuel.

Schools are suspended and fuel is limited to essential services. Several major cities, including the commercial capital Colombo, are left in line for hundreds of hours to buy fuel, sometimes clashing with the police and military.

Sri Lanka’s energy minister, Kanchana Wijesekera, said on Sunday the country has less than a day’s worth of fuel left.

“In terms of fuel and food, our country would face this crisis at some point. Fuel was scarce. Food prices rose,” he said, adding that international crises such as Russia’s war in Ukraine have made things worse. .

“Due to the recent global crises, this situation has become more acute and we who were in the frying pan have fallen into the oven,” said Wijesekera.

Prime Minister Wickremesinghe said on Tuesday he hopes a report on debt restructuring and sustainability will be submitted to the IMF in August. Once an agreement is reached, a comprehensive loan assistance program would be prepared for a period of four years, Wickremesinghe said.

As Sri Lanka runs out of fuel, doctors and bankers protest 'impossible situation'

His speech in parliament was interrupted by opposition lawmakers chanting “Gota go Home”, a reference to President Gotabaya Rajapaksa, who was in attendance.

For months, large numbers of Sri Lankans have been calling for Rajapaksa’s resignation over allegations of economic mismanagement.

Wickremesinghe said inflation will rise to 60% by the end of this year.

“This is going to be a difficult and bitter journey,” Wickremesinghe said. “But at the end of this journey, we can get relief. Progress can be made.”

The British government said on Tuesday it is now advising against all but essential travel to Sri Lanka due to the impact of the economic crisis.

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