Sri Lanka’s unparalleled economic hardships will last at least another two years, according to the country’s Finance Minister, who also warned of an impending cash constraint. Months of outages and severe food, fuel, and medication shortages have wreaked havoc on the South Asian island country.
‘People should know the truth. I don’t know if people realise the gravity of the situation. 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’, Finance Minister Ali Sabry told parliament.
Sabry stated that the nation currently has less than $50 million in useable foreign exchange reserves, which are required to finance basic products in order to keep Sri Lanka’s import-dependent economy afloat.
Official data suggests that the country has $1.7 billion in reserves, but that amount includes a Chinese currency exchange that cannot be used to pay for imports from other nations.
Sabry believes the administration made a mistake by postponing a bailout request to the International Monetary Fund. Negotiations with the IMF are underway, but the central bank governor of Sri Lanka has stated that any support from the lender will take months. The administration is expected to release a new budget soon, which would include tax increases to replenish state coffers.
‘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 problems began when the coronavirus outbreak decimated tourism and remittance revenues. Due to a shortage of funds to pay for fuel imports, utilities have imposed daily blackouts to ration energy, while huge lineups for petrol and kerosene snake around service stations.
Hospitals are in desperate need of essential medicines, and the government has called for donations from residents across the world. Sri Lanka stated last month that it will default on its $51 billion foreign debt.
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President Gotabaya Rajapaksa has indicated that he is prepared to establish a unity government to help the country navigate through the issue. The opposition, on the other hand, has refused to join a government that includes the president or any other members of the strong Rajapaksa family.
For over a month, protesters have been camping outside the president’s seaside office, attempting to persuade him to resign. Trade unions, who conducted a walkout last week, have announced that they will strike again on Friday to force the entire administration to quit.
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