Devjyot and Uditha Jayasinghe

COLOMBO (Reuters – Sri Lanka’s prime Minister met Wednesday with protesters to demand that the government resign over the handling of the current economic crisis. The opposition also threatened to introduce a no-confidence motion in Parliament.

With 22 million inhabitants, the island nation is facing its most severe financial crisis in decades. The country’s currency shortage has made it impossible to import fuel or medicines. It also causes hours-long power outages.

Numerous protestors took to the streets to decry the government of President Gotabaya Rajapaksa as well his elder brother Prime Minister Mahinda Rajapaksa.

His office released a statement saying that the prime minister was ready to talk with protesters at Galle Face Green, which refers to the site of protest which has been the center of discontent.

The office stated that if protesters were willing to talk about their ideas to solve the problems facing the country, the prime minister would be open to inviting their representatives to the talks.

The tent encampment has seen a rise in protestors over the past few days, with more food stalls and medical facilities. Some even said they’d only move if Rajapaksas stopped stepping down.

Following months of delayed negotiations due to worsening crises, Sri Lanka is set to start talks with the International Monetary Fund for a loan program.

Numerous rating agencies downgraded Sri Lanka’s sovereign rating Wednesday, citing rising funding costs and the economic crisis.

Fitch also downgraded Sri Lanka’s foreign currency rating. It stated that the decision reflected its belief in a sovereign default process.

“Sri Lanka’s debt restructuring process is likely to be complicated and may take months to complete,” S&P Global (NYSE:) said in a statement.

The World Bank revised Sri Lanka’s growth forecasts to 2.4%, from 2.1% earlier on Wednesday. However, it warned that economic prospects remain uncertain.

The central bank chief announced Tuesday that he would suspend foreign debt payments, and redirect dwindling foreign reserve funds to import essentials.

While the IMF did not comment on Tuesday’s announcement, they said that it would be examining the implications and supported the plans of the country to reach out to creditors.

Masahiro Nazaki, IMF mission chief for Sri Lanka told Reuters that Sri Lanka’s debt was unsustainable. He also stated that only fiscal policy and macroeconomic policies could restore the debt sustainability of Sri Lanka.

We welcome Sri Lanka’s plans to have a dialogue with creditors.

JP Morgan analyst have highlighted the importance of political instability in order to ensure that foreign assistance is secured for the government.

The uncertainty was further exacerbated by the Samagi Jana Balawegaya, main opposition alliance (SJB), declaring that they would grant the president/prime minister one week to retire before moving a vote of no confidence to parliament.

IMF talks are only possible if there is political stability. “The people don’t trust this government,” Eran Wickramaratne (SJB national organiser) told Reuters.

Wickramaratne declared that both the president and prime Minister must resign, while adding that there was sufficient support in Parliament for the opposition.

According to the government, it maintains a majority within the 225 member parliament. This is despite the fact that more than two dozen members of Congress have left the ruling coalition last week and declared themselves independent.

Critics claim that the root of the crisis lies in poor management of public finances, which was exacerbated by tax cuts implemented by the government shortly before the COVID-19 pandemic.

Reporting Uditha Jayasinghe in Colombo and Devjyot Gahoshal, Additional reporting by Mehr bedi; Editing done by Robert Birsel Lisa Shumaker Richard Chang Shinjini Ganguli