Sri Lanka economy on brink of collapse

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A motorcyclist rides past a bus burnt during demonstrations against the government over Sri Lanka’s crippling economic crisis, in Colombo on Wednesday. AFP

Sri Lanka’s economy will “collapse” unless a new government is urgently appointed, the central bank chief warned May 11, as security forces fanned out on the streets to restore order after spasms of mob violence.

Police say nine people have died since Monday, when frustration at a dire economic crisis erupted into clashes between backers and opponents of President Gotabaya Rajapaksa, injuring more than 200.

Armoured personnel carriers have carried troops into the capital Colombo and a heavy security presence commanded to shoot looters on sight has largely restored order without sparking further violence.

But Central Bank Governor Nandalal Weerasinghe said it was critical that a new administration take charge by Friday or the country would suffer a catastrophe.

“The economy will completely collapse and no one will be able to save it,” he told reporters.

“The country was fast going down a slope when I took over just over a month ago. I thought we were able to apply the brakes, but with events of Monday the brakes no longer work.”

Shortly after taking over as the bank’s chief in April, Weerasinghe announced a default on Sri Lanka’s $51 billion external debt, saying the country had no money to pay its creditors.

He said political stability was vital to implement the reforms needed to address Sri Lanka’s snowballing debt crisis and the acute shortage of foreign exchange to import essentials.

A nationwide curfew is still in effect and the streets of the capital Colombo were almost deserted on Wednesday aside from soldiers manning checkpoints.

Several roads were still partially blocked by the charred remains of buses that had been set alight by anti-government crowds.

The heavy security presence has brought widespread public unease, prompting Sri Lanka’s top military official to publicly deny speculation of a looming coup.

“Don’t ever think that we are trying to capture power,” said Kamal Gunaratne, the secretary of the defence ministry.

“The military has no such intentions.”

A small crowd continued to defy the curfew near President Rajapaksa’s seafront office, where a protest camp has for the past month maintained a vigil calling on him to step down.

“We want the whole Rajapaksa clan out because they are so, so corrupt. They have been eating into Sri Lanka like a caterpillar eating into some fruit,” activist Kaushalya Fernando told AFP.

In a televised address to the nation, Rajapaksa said he was willing to curtail his own powers in the interests of forming a unity government to navigate Sri Lanka out of the crisis.

“I appeal to all to support me to ensure that the country does not collapse and we are able to prove the essentials to all,” he said.

But the main opposition SJB party reiterated it will not be a part of any government with Rajapaksa still president, even after his brother Mahinda’s resignation as prime minister on Monday.