Shortages in Sri Lanka continue to worsen with no resolution in sight in the near future. On Monday, June 27, the Gotabaya Rajapaksa government, which has been facing long-standing criticism for its economic mismanagement, halted fuel supplies in the country to only “essential services” till July 10.
Spokesman Bandula Gunawardena announced the official decision in a televised speech, adding that except, “Port, health services, food transport will be provided petrol and diesel while all other sectors are requested to stay at home and provide services online in this difficult time.” The news was confirmed by Minister of Power and Energy Kanchana Wijesekara on his social media account.
2) Until the next shipments are at Port and unloaded, Public Transport, Power Generation and Industries will be given a priority. Limited stocks of Diesel and Petrol will be distributed to limited stations throughout next week and request the public not to line up for fuel.
— Kanchana Wijesekera (@kanchana_wij) June 25, 2022
The drastic move was taken as the crisis-hit island nation ran out its stock of foreign reserves and existing fuel supplies. Acute shortages of petrol, diesel and cooking gas have erupted into instances of clashes at gas stations as hundreds of people queue up for supplies for days on end and sometimes even weeks.
Sri Lanka's fuel crisis intensifies : Massive fuel queues around the country with very limited supply
📸 Wariyapola : Bhawantha Jaysundara pic.twitter.com/ikYAsAHhCc
— NewsWire 🇱🇰 (@NewsWireLK) July 2, 2022
The lack of fuel has brought the entire nation to a halt and severely affected other sectors – one of them being education. Starting June 20, the higher education regulatory body University Grants Commission (UGC) and university vice-chancellors decided to temporarily shut down at least three state universities, including the largest public university, University of Peradeniya, and closed schools in the main cities for two weeks. The decision has led to interruption of academic activities in most universities as teachers and students are unable to attend classes, which had only recently opened after the COVID-19 pandemic.
On June 29, scores of people including doctors and bankers demonstrated against the worsening fuel shortage.
Sri Lanka is experiencing its worst economic breakdown in several decades after consumer price levels reached 54.6%. The economy is now on the brink of entering hyperinflation.
To tackle the crisis, the Ranil Wickremesinghe-led cabinet of ministers has been in talks to receive support through the IMF’s Extended Fund Facility Program. The international lending authority released a concluding statement on June 30 signaling “constructive and productive discussions” with the Sri Lankan government .
Although noting the vulnerability that the crisis has brought on Sri Lanka’s citizens, the IMF’s support package, as expected, will entail a ‘growth’ focused comprehensive economic program “to correct macroeconomic imbalances and restore debt sustainability.” In mid-May this year, the Sri Lankan central bank declared a ‘pre-emptive’ default on all of its total foreign debt which stands at USD 51 billion.
The international lending authority has also recommended significant tax-reforms in light of an eroded revenue base. However, in an earlier story, Peoples Dispatch had documented how increasing taxes can place Sri Lanka’s robust state-funded sectors like health under threat of free-market flows.
An IMF team had productive talks w/ #SriLanka on economic policies and reforms to be supported by an Extended Fund Facility program. Significant progress was made. Talks will continue to reach a staff-level agreement in the near term. https://t.co/846DvQs36n
— IMF (@IMFNews) June 30, 2022
While speaking to the media on July 3, Wijesekara revealed that Colombo is struggling to raise USD 587 million to pay for around half a dozen fuel shipments as raising foreign reserves continues to remain a problem. Sri Lanka only has 12,774 tons of diesel and 4,061 tons of petrol left in its government reserves while it waits for the next shipment of fuel which is scheduled to arrive by July 9.