Sri Lankan PM says $5 billion needed to tackle economic crisis

COLOMBO — Sri Lanka’s prime minister has said the country needs at least $5bn (£4bn) over the next six months to pay for essential goods as it faces its worst economic crisis in more than 70 years.

Ranil Wickremesinghe told parliament the money was needed for basic items such as food, fuel and fertiliser.

In May, Sri Lanka defaulted on its debts to international lenders for the first time in its history.

The country has held bailout talks with the International Monetary Fund.

On Tuesday, Wickremesinghe, who is also the country’s finance minister, told parliament that more money was needed this year to meet Sri Lanka’s basic needs.

He said the island nation, which has about 22 million people, needs $3.3 billion for fuel imports, $900 million for food, $600 million for fertilizer and $250 million. for cooking gas.

It comes as Sri Lankan lawmakers accepted a $55 million loan for fertilizer from India’s Exim bank.

The United Nations also plans to launch a global appeal for Sri Lanka and has pledged $48 million for food, agriculture and health care, Wickremesinghe added.

He also warned of a slowdown in government payments to businesses and workers across the country as funds are redirected to pay for food supplies.

“A lot of people will be without food, so the food program we are launching will ensure that all families, even if they have no income, will have food,” Wickremesinghe said.

“We can have community kitchens in temples [and] churches to provide food. The community needs to get involved,” he added.

The South Asian nation will also try to renegotiate a $1.5 billion financial support agreement with China, Wickremesinghe said.

Sri Lanka is grappling with its worst economic crisis since its independence from the United Kingdom in 1948.

The country’s economy has been hit hard by the pandemic, rising energy prices and populist tax cuts.

A shortage of medicine, fuel and other essentials has also helped push the cost of living to record highs.

Sri Lanka’s official inflation rate, or the rate at which prices are rising, rose to 39.1% year-on-year in May. At the same time, food prices in its largest city, Colombo, rose by 57.4%.

Mr Wickremesinghe is expected to unveil a provisional budget next month as he faces the challenge of cutting overall public spending while continuing to provide social benefits.

Last week, Sri Lanka’s agriculture minister called on farmers to grow more rice as he said “the country’s food situation is getting worse”.

The government also announced an immediate increase in value added tax (VAT) from 8% to 12%. The move was expected to boost revenue by 65 billion Sri Lankan rupees ($181m; £144m). He also said corporation tax would rise in October from 24% to 30%. —BBC