Sri Lankan economy on brink of ‘complete collapse’ as ex-PM flees to naval base

Weerasinghe also threatened to resign if ongoing political impasse is not resolved soon

Arpan Rai
Thursday 12 May 2022 12:13 BST
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Sri Lanka deploys troops amid widespread violent protests

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Sri Lanka’s economy will “completely collapse” if the political stability in the Asian nation — hollowed by an economic crisis and administrative vacuum — is not restored, the country’s central bank chief has warned.

“If there is no government in the next two days, the economy will completely collapse and no one will be able to save it,” AFP quoted Dr Nandalal Weerasinghe as saying on Wednesday.

He also threatened to resign as the governor of the Central Bank of Sri Lanka if the ongoing political impasse, fuelling protests across the country, is not resolved soon.

The recent wave of violence unleashed due to massive political instability in the country has hit the top bank’s recovery plans, and daily economic activity has become more troubled with the exit of prime minister Mahinda Rajapaksa from the administration.

Thousands of Sri Lankans have taken to the streets demanding the resignations of president Gotabaya Rajapaksa and his brother Mahinda Rajapaksa over the debt crisis that has led to a shortage of fuel, food and other essentials.

A Wednesday night speech by President Rajapaksa, ignoring calls by citizens to resign, has not impressed Sri Lankans who expressed their anger in quotes to media and social media posts. “Where were you for the last 30 days? People don’t have medicine, people don’t have food, the entire country’s at a standstill,” protester Kavindya Thennakoon told the BBC.

Sri Lanka is on the verge of bankruptcy after suspending payment of $7bn of foreign loans it was due to pay this year out of a $25bn due by 2026. Sri Lanka’s total foreign debt stands at $51bn.

Mr Weerasinghe, who assumed the role of governor only last month, said he had sensed the country’s descent “down a slope”, and added that the brakes on the situation no longer work.

For Sri Lanka to make even minor progress, the country needs a “politically stable environment – a cabinet, a parliament, prime minister and finance minister” he said in a press conference on Wednesday. He also warned that it would be difficult for the central bank to make any progress without an administration in place.

He added that in the absence of a solution to the crisis in the next one or two weeks, Sri Lankans will face power cuts of up to 10 to 12 hours per day.

This is the country’s biggest economic crisis since independence in 1948.

On Thursday, hundreds of Sri Lankans in Colombo reached bus stops to exit the main city and go back to their hometowns amid worsening situation as Mr Rajapaksa warned of anarchy. A curfew has been ordered from 2pm on Thursday in a bid to control the demonstrations in the country against the administration.

Autorickshaw driver Nimal Jayantha said he has been forced to return home without money as he lined up outside a fuel station for petrol.

“We have hit the bottom economically. I don’t have the time to do my job. By the time I stay in the fuel queue and get petrol, a curfew will be imposed. I will have to go home without any money,” he said.

At least nine people were killed and more than 300 were injured in the clashes that broke out in the country on Monday, following which authorities roped in armed forces.

Members of the political family, including the former Sri Lankan prime minister, have taken shelter in a heavily guarded military naval base and are under protection of the armed forces, triggering widespread anger.

Protesters painted a graffiti reading “Gota Go Home” on the walls of the president’s house in red paint, demonstrating the public anger against the administration as Sri Lanka faces rising oil prices and tax cuts on top of the economic losses the country brutally faced during the pandemic.

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