Ranil Wickremesinghe told parliament that the South Asian nation was facing “a much more serious situation” than deficiencies alone and warned of a “possible fall to the bottom”. “Our economy has completely collapsed,” he said on Wednesday. The crisis on the island of 22 million is considered the worst of recent memory, but Wickremesinghe did not report specific new developments. His comments were intended to emphasize to critics and opposition lawmakers that he has inherited a difficult task that cannot be rectified quickly. “It raises expectations very, very low,” said Anit Mukherjee, a policy associate and economist at the Center for Global Development in Washington. Wickremesinghe’s statements also sent a message to potential lenders: “You can not let a country of such strategic importance collapse,” said Mukherjee, who noted that Sri Lanka is in one of the busiest shipping lanes in the world. The Sri Lankan economy is being burdened by heavy debts, lost tourism revenues and other effects of the pandemic, as well as rising commodity costs. The result is a country on the verge of bankruptcy, with almost no money to import gasoline, milk, cooking gas and toilet paper. Lawmakers from the two main opposition parties are boycotting parliament this week to protest Wickremesinghe, who became prime minister just over a month ago and is also finance minister for failing to keep his promises to overthrow the economy. Wickremesinghe said Sri Lanka was unable to buy imported fuel due to the large debt owed by its oil company. Ceylon Petroleum Corporation owes $ 700 million, he told lawmakers. “As a result, no country or organization in the world is willing to give us fuel. “They are even reluctant to provide cash for fuel.” The crisis has begun to hit Sri Lanka’s middle class, which is estimated to be 15% to 20% of the country’s urban population. The middle class began to expand in the 1970s as the economy opened up to more trade and investment. It has grown steadily since then. Until recently, middle-class families generally enjoyed financial security. Now those who have never had to think twice about fuel or food are struggling to manage three meals a day. “They have really shaken up more than ever in the last three decades,” said Bhavani Fonseka, a senior fellow at the Center for Alternative Policies in Colombo, Sri Lanka. “If the middle class is fighting like this, imagine how severely the most vulnerable are affected,” Fonseka added. The situation has derailed years of progress towards a relatively comfortable lifestyle sought throughout South Asia. Government officials took leave every Friday for three months to save fuel and grow their own fruits and vegetables. Inflation in food is 57%, according to official data. Wickremesinghe took office after days of violent protests over the country’s economic crisis that forced his predecessor to resign. On Wednesday, he blamed the previous government for failing to act promptly as Sri Lanka’s foreign exchange reserves plummeted. The currency crisis has curtailed imports, creating serious shortages that also include drugs and forcing people to stand in long queues to receive basic necessities. “If at least steps had been taken to slow down the economy in the beginning, we would not be facing this difficult situation today. But we missed this opportunity. “Now we see signs of a possible fall to the bottom,” he said. So far, Sri Lanka has been confused, with support mainly from $ 4 billion in credit limits from neighboring India. But Wickremesinghe said India would not be able to keep Sri Lanka alive for long. It has also pledged $ 300 million to $ 600 million from the World Bank to buy medicines and other essentials. Sri Lanka has already announced that it is suspending the repayment of $ 7 billion in foreign debt that expires this year, pending the outcome of negotiations with the International Monetary Fund for a rescue package. It must pay an average of $ 5 billion a year by 2026. Wickremesinghe said IMF assistance seemed to be the country’s only option now. Agency officials are visiting Sri Lanka to discuss the idea. An agreement at staff level is likely to be reached by the end of July. “We completed the initial discussions and exchanged ideas on various areas,” said Wickremesighe. Representatives of the government’s financial and legal advisers for debt restructuring are also visiting the island, and a team from the US Treasury Department will arrive next week, he said. _
