Sri Lanka

Sri Lanka abruptly restricted fuel supplies and told residents to stay home, raising the risk of more unrest as the government struggles to provide essential goods due to a crippling sovereign debt crisis that has rocked the country for months, Bloomberg News reported. The island nation’s cabinet of ministers Monday decided to limit distribution of fuel to essential services until July 10, spokesman Bandula Gunawardena said in a televised statement, adding that inter provincial public transport would likely come to a halt.

Sri Lanka’s debt-laden economy has “collapsed” after months of shortages of food, fuel and electricity, the prime minister told lawmakers Wednesday in comments that underscored the country’s dire situation as it seeks help from international lenders, the Associated Press reported. Ranil Wickremesinghe told Parliament the South Asian nation faces “a far more serious situation” than the shortages alone, and he warned of “a possible fall to rock bottom.” “Our economy has completely collapsed,” he said.

Sri Lanka was sued in the US by a bondholder after the South Asian nation defaulted on its debt for the first time in history while struggling to stop an economic meltdown, Bloomberg News reported. Hamilton Reserve Bank Ltd., which holds more than $250 million of Sri Lanka’s 5.875% International Sovereign Bonds due July 25, filed the suit Tuesday in a New York federal court seeking full payment of principal and interest.

Sri Lanka will need $5 billion over the next six months to ensure basic living standards, and is renegotiating the terms of a yuan-denominated swap worth $1.5 billion with China so as to fund essential imports, the prime minister said on Tuesday, Reuters reported. The island nation's worst economic crisis in seven decades led to a shortage of foreign exchange that stalled imports of essential items such as fuel, medicine and fertiliser, provoking devaluation, street protests and a change of government.

Sri Lanka seeks to secure around $5 billion in funding this year to cover repayments for fuel imports and other items bought through credit lines, and another $1 billion to bolster its foreign reserves, the prime minister's office said on Thursday, Reuters reported. The island nation is grappling with its worst financial crisis in over seven decades with a severe foreign exchange shortage that has left it struggling to pay for essential imports including food, fuel, fertilisers and medicines. Sri Lanka's foreign exchange reserves stood at $1.81 billion in April.

Sri Lanka’s headline inflation surged to a record in May amid continuing food and fuel shortages as the country struggles to lift itself out of its worst economic crisis, Bloomberg News reported. Consumer prices in the capital Colombo rose 39.1% from a year ago, the Department of Census and Statistics said in a statement Tuesday. That’s faster than the median 35% climb forecast by economists in a Bloomberg survey and is the highest level on record. Food inflation surged 57.4%, while prices of non-food items jumped 30.6%, the data showed.

Sri Lanka’s prime minister said on Thursday that he will quickly prepare an economic reform program and seek approval from the International Monetary Fund — because global inflation and the financial impact of Russia’s invasion of Ukraine on other countries could limit their ability to help the island nation, the Associated Press reported. Prime Minister Ranil Wickremesinghe said that officials have reached agreement on basic reforms concepts with the IMF and that he plans to have the economic reform program ready within two weeks.

The International Monetary Fund (IMF) said that it made “good progress” in analysing Sri Lanka’s economic situation and identifying policy priorities, while cautioning that a loan would require adequate assurances that debt sustainability will be restored, Bloomberg News reported.

Sri Lanka’s newly appointed Prime Minister Ranil Wickremesinghe will double up as finance minister leading bailout talks with the International Monetary Fund, Bloomberg News reported. Wickremesinghe, who was appointed this month following violent unrest, was sworn in by President Gotabaya Rajapaksa as Minister of Finance and Economic Stabilization and National Policies, according to a statement from the presidential media unit.

The Group of Seven economic powers support debt relief efforts for Sri Lanka, G7 finance chiefs said on Thursday in a draft communique from a meeting in Germany after the country defaulted on its sovereign debt, Reuters reported. "The G7 stands ready to support the Paris Club’s efforts, in line with its principles, to address the need for a debt treatment for Sri Lanka," the draft statement to be finalised before the end the meeting on Friday said.