Sri Lanka will have to endure its unprecedented economic hardships for at least two more years, the country’s finance minister said on Wednesday while warning of an imminent cash crunch.
Months of blackouts and acute shortages of food, fuel and pharmaceuticals have brought widespread suffering across the South Asian island nation.
Public anger has sparked sustained protests demanding the government resign over its mismanagement of the economic crisis, Sri Lanka’s worst since independence in 1948.
“People should know the truth. I don’t know if people realize the gravity of the situation,” said Finance Minister Ali Sabry.
“We won’t be able to resolve this crisis in two years, but the actions we take today will determine how much longer this problem will drag.”
Sabry said the country now has less than US$50 million in usable foreign exchange reserves, needed to finance essential goods to keep Sri Lanka’s import-dependent economy ticking over.
Official data shows US$1.7 billion in reserves, but most of that figure includes a Chinese currency swap which cannot be used to pay for imports from other countries.
Sabry said the government had erred by delaying an approach to the International Monetary Fund for a bailout.
Protests to continue
Civil society and religious groups warned this week that more people are coming out in the streets to call for the resignation of President Gotabaya Rajapaksa.
“If the president does not listen to the voice of the public, [the people] will continue their fight against the president and the government,” said Father Rohan Silva, director of the Center for Society and Religion in Sri Lanka.
He said people are set to hold demonstrations on May 6.
Anti-government protests erupted in Sri Lanka in early March as the worst economic crisis in decades unfolded.
Protesters accuse the government of mismanaging the economy and creating a foreign exchange crisis that has led to shortages of essentials.
Negotiations with the IMF are ongoing but Sri Lanka’s central bank chief has said any assistance from the lender is months away.
The government will unveil a new budget soon and raise taxes to replenish state revenue.
“It was a historic mistake to sharply reduce taxes in 2019,” Sabry said, adding that the previous central bank chief had also blundered by exhausting foreign reserves to defend Sri Lanka’s overvalued currency.
Sri Lanka’s economic crisis took hold after the coronavirus pandemic hammered income from tourism and remittances.
Unable to pay for fuel imports, utilities have imposed daily blackouts to ration electricity, while long lines of people snake around service stations for petrol and kerosene.
Hospitals are short of vital medicines and the government has appealed to citizens abroad for donations.
Last month Sri Lanka announced it was defaulting on its US$51 billion foreign debt.
President Rajapaksa has said he is willing to form a unity government to manage the country through the crisis.
But the opposition has refused to join an administration with the president or any other members of the powerful Rajapaksa family still in power.
Protesters have been camped outside the president’s seafront office for nearly a month to pressure him into stepping down.
Trade unions, which staged a strike last week, have said they will stop work again on Friday to pressure the entire government to resign. – with a report from Agence France Presse
