Sri Lanka’s Prime Minister says economy has collapsed

Sri Lanka’s prime minister has said its debt-laden economy has “collapsed” after months of shortages of food, fuel and electricity.

Prime Minister Ranil Wickremesinghe told Sri Lanka’s parliament on Wednesday that the South Asian country is “facing a far more serious situation beyond the mere shortages of fuel, gas, electricity and food. Our economy has completely collapsed.”

Mr Wickremesinghe is also the finance minister tasked with stabilising the economy.

He said Sri Lanka is unable to purchase imported fuel, even for cash, due to heavy debts owed by its petroleum corporation.

He said the government missed out on the chance to turn the situation around, and warned that “we are now seeing signs of a possible fall to rock bottom”.

“Currently, the Ceylon Petroleum Corporation is $700 million in debt,” he told legislators.

“As a result, no country or organisation in the world is willing to provide fuel to us. They are even reluctant to provide fuel for cash.”

Sri Lanka has been muddling through mainly supported by four billion dollars (£3.25 billion) in credit lines from neighbouring India.

But Mr Wickremesinghe said India would not be able to keep Sri Lanka afloat for too long.

Sri Lanka has already announced that it is suspending repayment of seven billion dollars (£5.7 billion) in foreign debt due for repayment this year, pending the outcome of negotiations with the International Monetary Fund on a rescue package.

It must pay five billion dollars (£4.07 billion) on average annually until 2026.

The foreign currency crisis has resulted in massive shortages that have forced people to stand in long queues to buy essentials, including fuel, cooking as and medicine.