Devjyot and Uditha Jayasinghe

COLOMBO, (Reuters) – Sri Lanka’s central bank secured foreign currency to purchase fuel and gas shipments to ease severe shortages. However, police used tear gas and water canon against student protestors.

As the country struggles with its greatest economic crisis in decades, many of Sri Lanka’s petrol stations are dry. Many people were lining up at Colombo’s pumps holding plastic cans. As troops in combat gear and assault rifles patrolled streets, there was a large crowd. The traffic was very light.

According to residents, most people stayed at home due to the shortage of transportation.

Many students carrying black flags protested the government by marching on Colombo’s Fort. A witness to Reuters claims that police fired multiple rounds of water canon and tear gas to stop them, as per a witness.

P. Nandalal Weerasinghe, Governor of the Central Bank, stated that sufficient dollars were available to purchase fuel and cooking gases shipments. He used in part $130million received from World Bank as well as remittances sent by Sri Lankans living overseas.

After the central bank had held interest rates stable at its policy meeting, Mr. He spoke after a huge 7 percent increase in April which it claimed was making its way through the system.

Weerasinghe stated that the country is more stable politically and economically. He also said that he will continue in his position. Reporters were told by Weerasinghe on May 11 that he would quit in two weeks if the country does not have political stability. This is because any attempts to solve the current economic crisis will fail amid chaos.

Ranil Wickremesinghe, an opposition parliamentarian was elected prime minister and has already made four cabinet appointments. He has not yet named a finance minister.

According to the governor at the central banking bank, inflation may rise even further to 40% over the coming months. However it is being driven primarily by supply-side forces. The bank and government had already taken measures that reined in demand-side inflation.

The April inflation rate was 29.8%, with food prices rising 46.6% annually.

The economic crisis in Sri Lanka has been caused by rising oil prices, the COVID-19 pandemic that battered the economy and the populist tax cuts implemented last week by President Gotabaya Rajapaksa’s brother Mahinda Rajapaksa.

The government also decided to prohibit the import of chemicals fertilisers and heavily subsidised fuel domestically. These factors caused a massive economic downturn in the sector of agriculture.

TEST SUPPORT

Officially, Sri Lanka has also fallen into default with its sovereign debt. The grace period for making some overdue bond interest payments ended Wednesday.

Weerasinghe stated that plans to restructure the debt were close to being finalized and that he will be sending a proposal soon.

He stated, “We are currently in pre-emptive default.” “We cannot repay until we have a debt restructuring,” he stated.

According to the central bank, energy and utility price revisions are urgently needed. Analysts believe that prime ministers will be key to overcoming public anger and pushing reforms through parliament.

Shehan Cooray is the head of research for Acuity stockbrokers in Colombo. “They must bring in crucial reforms and other steps to parliament to test and see if there really are consensus and stability.”

However, he said that things had changed for the better. Cooray explained that there were times when finding a governor was impossible.

Wickremesinghe said in parliament that six fuel shipment had been delivered to Colombo’s port.

He said that there were two petrol shipments between them, but it will not stop the shortages.

Our goal is to cut the lines now and to find a way of starting a fuel reserve, so that even if some shipments are lost there will be fuel.

There is however a lot of opposition. Protesters calling for his removal claim that he is their puppet.