Crisis-hit Sri Lanka appoints PM to helm finance ministry
May 25 2022 12:07 PM
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File photo of Sri Lanka's Prime Minister Ranil Wickremesinghe

AFP

Sri Lanka's Prime Minister Ranil Wickremesinghe was on Wednesday given the additional responsibility of running the finance ministry as the island nation grapples with its worst-ever economic crisis.

The South Asian island nation has suffered months of dire shortages and anti-government protests, with importers unable to finance vital food, fuel and medicines.

Wickremesinghe, 73, was sworn in as finance minister after two weeks of wrangling among coalition partners for the crucial position ahead of bailout talks with the International Monetary Fund.

His appointment was delayed by a dispute between Wickremesinghe and the Sri Lanka Podujana Peramuna (SLPP) party of President Gotabaya Rajapaksa over who would take the post.

"The president's party had wanted the finance portfolio, but the PM insisted he wanted it if he is to lead the country out of the economic chaos," a top politician involved in the negotiations told AFP, on condition of anonymity.

Wickremesinghe is expected to soon unveil a revised budget promising relief for poorer Sri Lankans suffering through record inflation and spiralling food prices. 

Staff-level talks with the IMF concluded on Tuesday, but it is expected to take six more months for the Washington-based lender to agree on a bailout package, central bank officials said.

Sri Lanka has already defaulted on its $51 billion foreign debt and appointed international consultants on Tuesday to help restructure its international sovereign bonds and other bilateral loans.

The government has effectively ended subsidies on fuel by raising prices to a record high on Tuesday, and Wickremesinghe's administration is expected to hike electricity and water tariffs to raise much-needed revenue. 

Petrol and diesel both remain in short supply and motorists are forced to queue, sometimes for days, to fill up.

 

-Fresh loan-

 

The government this week announced it was seeking a fresh $500 million loan from India to purchase fuel, in addition to two credit lines worth $700 million already provided by New Delhi.

The census office reported Monday that the country's overall inflation last month was a staggering 33.8 percent year on year, with food inflation at an even higher 45.1 percent.

Sri Lanka's foreign reserves shrank dramatically from 2020 as the coronavirus pandemic hit tourism and remittances from Sri Lankans abroad.

The pandemic compounded liquidity problems triggered by huge tax cuts introduced in 2019 soon after President Rajapaksa took office.

Protesters have demanded the president quit over government mismanagement of the crisis. 

His elder brother, Mahinda Rajapaksa stepped down as prime minister two weeks ago, clearing the way for Wickremesinghe's appointment.



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