Sri Lankan President appeals for patience amid economic crisis

Colombo: Sri Lanka’s president Ranil Wickremesinghe on Wednesday appealed for patience amid the country’s worst economic crisis but promised brighter times ahead.

Wickremesinghe said in a policy speech after inaugurating a new parliamentary session that he had been forced to make unpopular decisions to salvage the country’s finances, including by implementing measures such as higher taxes.

“Inflation rises during an economic crisis. The price of goods increases. Employment is at risk. Businesses collapse. Taxes increase. It is difficult for all sections of the society to survive. However, if we endure this hardship for another five to six months, we can reach a solution,” Wickremesinghe said.

He added that government employees would receive additional pay in the third and fourth quarters of the year and that the private sector would also be granted concessions. Wickremesinghe said that “if we continue in this manner … the public would become prosperous, with income sources increasing. The interest rate can be reduced. In another three years, present incomes can be increased by 75%.”

Sri Lanka is effectively bankrupt and has suspended repayment of nearly $7 billion in foreign debt due this year pending the outcome of talks with the International Monetary Fund for a bailout package.

The country’s foreign debt exceeds $51 billion, of which $28 billion must be repaid by 2027.

A currency crisis has also led to shortages of essential items like food, fuel, medicine and cooking gas. Massive protests last year forced Wickremesinghe’s predecessor, Gotabaya Rajapaksa, to flee the country and resign.

Wickremesinghe has managed to somewhat stabilize the economic situation by reducing the shortages, enabling schools and offices to function. But power cuts continue because of the fuel shortage, and the government struggles to find money to pay government employees.

India was the first bilateral creditor to announce financial assurances to the IMF and on Tuesday the president’s office shared with the media a statement from the Paris Club — a group of creditor nations including the U.S., Britain, France and others — giving similar assurances.

However, the IMF program hinges on China, which owns about 10% of Sri Lanka’s foreign debt and has given a two-year debt moratorium starting from 2022. But a visiting U.S. diplomat said last week that China has not done enough to meet IMF standards for loan restructuring.

Image courtesy of (Image: Republic World)

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