Sri Lanka admits bankruptcy, crisis to drag through 2023

Sri Lanka is bankrupt and the acute pain of its unprecedented economic crisis will linger until at least the end of next year, Prime Minister Ranil Wickremesinghe told parliament Tuesday.

The island nation’s 22 million people have endured months of galloping inflation and lengthy power cuts after the government ran out of foreign currency to import vital goods.

Wickremesinghe said the once-prosperous country will go into deep recession this year and acute shortages of food, fuel and medicine will continue.

“We will have to face difficulties in 2023 as well,” the premier said. “This is the truth. This is the reality.”

He said Sri Lanka’s ongoing bailout talks with the International Monetary Fund depended on finalising a debt restructuring plan with creditors by August.

“We are now participating in the negotiations as a bankrupt country,” Wickremesinghe said.

“Due to the state of bankruptcy our country is in, we have to submit a plan on our debt sustainability to them separately. Only when (the IMF) are satisfied with that plan can we reach an agreement.”

The IMF last week said more work was needed to set the nation’s finances right and repair its runaway fiscal deficit before a deal could be struck on a funding arrangement to address its balance of payments crisis.

Sri Lanka is currently almost completely without petrol and the government has shut down non-essential public services in an effort to conserve fuel.

The United Nations estimates that about 80% of the public are skipping meals to cope with food shortages and record prices.