27 June 2022 in Finance


These are delicate hours in Sri Lanka: a profound crisis that has been gripping 22 million people for months is having devastating effects, the likes of which have never been seen before: there is a shortage of essential goods such as food, medicine, gas and electricity, but it is above all the total absence of fuel that is worrying, since this means complete paralysis for the country, which has survived until today thanks to the credit lines granted by neighbouring India: 4 billion dollars plus 900 million from the World Bank for the purchase of medicines. But even the last dollar has been spent, and Sri Lanka is in total stalemate.

Ranil Wickremesinghe, Prime Minister in office since 12 May 2022, doesn’t know what to do: the country is formally in default, with a paralysed economy, skyrocketing inflation and social turmoil; the room for manoeuvre is narrow, and so far no concrete plans for economic restructuring have been presented. The only immediate measures have been the closure of schools and public offices for a fortnight to keep transport to a minimum[1].  The accounts are totally out of control, the Prime Minister has already announced that he will not be able to pay the 7 billion foreign debt due this year, a debt that amounts to 51 billion dollars to date[2].

The purchase of fuel is impossible: currently the state-run Ceylon Petroleum Corporation has a debt of USD 700 million[3] and no country or organisation will be willing to supply them with fuel, not even in exchange for cash. Energy Minister Kanchana Wijesekera has announced that he himself will travel to Qatar. Next Monday, two ministers will travel to Russia in an attempt to expand oil supply agreements: 90,000 tonnes of Siberian crude have already been acquired thanks to the Dubai-based intermediary Coral Energy, but much more is needed and the government will try to negotiate directly with Putin this time[4]. Last Sunday, the Ceylon Petroleum Corporation raised the price of diesel by 15% to Rs 460 per litre ($1.27) and petrol by 22% to Rs 550: since the beginning of the year, the price of diesel has quadrupled while that of petrol has tripled[5].

Meanwhile, Ranil Wickremesinghe is looking for support: Australia, a member of the ‘Quad’, a diplomatic grouping with India, Japan and the United States, has announced $35 million in assistance for health and food emergencies[6]. In the last two weeks, Sri Lanka was visited by a US delegation, which announced USD 120 million in new funding for small and medium-sized enterprises, a USD 27 million contribution to the dairy industry, and USD 5.75 million in humanitarian assistance. A further $6 million was committed in new grants for livelihoods and technical assistance on financial reform[7]. A generous gift, but a drop in the ocean. The only concrete hope is the International Monetary Fund: intensive talks are currently underway.

The crisis in Sri Lanka has deep roots: responsibility lies with the Rajapaksa clan, which held the country in check for decades, implementing dastardly economic policies in a climate of widespread corruption and social and inter-ethnic conflict. The pandemic then dealt the fatal blow, wiping out the only remaining source of economic sustenance: tourism. In this situation, Sri Lanka has not collected any money for months, and is not self-sufficient in energy, food or pharmaceuticals – and there are no positive signs in sight. In these hours, without there being a war, a tragedy of unknown proportions is about to erupt on the big island.


[1] https://www.channelnewsasia.com/asia/sri-lanka-school-government-office-shutdown-public-transport-fuel-2753991

[2] https://www.orfonline.org/expert-speak/fallacies-in-sri-lankas-external-debt-patterns/

[3] https://www.lemonde.fr/en/international/article/2022/06/22/sri-lanka-s-economy-has-collapsed-unable-to-buy-oil_5987647_4.html

[4] https://www.channelnewsasia.com/asia/sri-lanka-bankrupt-fuel-russia-qatar-oil-2771841

[5] https://www.channelnewsasia.com/asia/sri-lanka-bankrupt-fuel-russia-qatar-oil-2771841

[6] https://www.channelnewsasia.com/asia/bankrupt-sri-lanka-opens-imf-talks-begins-shutdown-2757971

[7] https://www.usnews.com/news/business/articles/2022-06-26/senior-us-officials-visit-sri-lanka-to-help-resolve-crisis

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