A decision by President Gotabaya in April last year Rajapaksa Banning all chemical fertilizers cut crop yields drastically and although the government has reversed the ban, there have been no major imports.
“While this may not be the time to get fertilizers for the Yala (May-August) season, steps are being taken to ensure adequate stock for the Maha (September-March) season,” the Prime Minister said. Ranil Wickremesinghe said in a message on Twitter late Thursday night.
“I sincerely urge everyone … to accept the gravity of the situation.”
Rajapaksa on Friday appointed nine new members to the cabinet, including those from the crucial health, trade and tourism ministries. But he did not name a finance minister and Wickremesinghe is likely to retain the portfolio.
Tourism-dependent Sri Lanka is facing severe shortages of foreign exchange, fuel and medicines, and economic activity has slowed.
“There is no point in talking about how difficult life is,” said APD Sumanavati, a 60-year-old woman who sells fruits and vegetables at Petta market in the commercial capital Colombo. “I can’t predict how things will be in two months, at this rate we won’t even be here.”
Nearby, a long queue formed in front of a shop selling LPG cylinders, whose prices have risen from Rs 2,675 in April to around Rs 5,000 ($14).
“Only about 200 cylinders were distributed, even though there were about 500 people,” said Mohammad Shazli, a part-time driver in the queue for the third day hoping to cook food for his family of five.
“Without gas, without kerosene, we cannot do anything,” he said. “What’s the last option? Without food we’re going to die. It’ll be one hundred percent.”
The central bank governor said on Thursday that foreign exchange had been secured from World Bank loans and remittances to pay for fuel and cooking gas shipments, but supplies were still on hold.
The governor said inflation could rise to 40% over the next few months, but this was mainly driven by supply-side pressures and bank and government measures, which were already curbing demand-side inflation.
Inflation hit 29.8% in April and food prices rose by 46.6% year-on-year.
G7 support on relief
As anger against the government spread, police fired tear gas and water cannons to disperse hundreds of student protesters in Colombo on Thursday. The protesters are demanding the removal of the President and the Prime Minister.
The economic crisis has been compounded by the confluence of tourism, rising oil prices and populist tax cuts of the Covid-19 pandemic after the government of President Rajapaksa and his brother Mahinda who resigned as prime minister last week.
Critics accuse Wickremesinghe of being appointed Prime Minister in his place, saying he is a puppet of the brothers, a charge he denies.
Other factors include heavily subsidized domestic prices of the fuel and the decision to ban chemical fertilizer imports.
The Group of Seven economic powers supports efforts to provide debt relief for Sri Lanka, the group’s finance chiefs said in a draft release from a meeting in Germany on Thursday after Sri Lanka defaulted on its sovereign debt.
Central bank chief P. Nandlal Veerasinghe has said that the debt restructuring plan is almost finalized and he will submit a proposal to the cabinet soon.
“We are in a pre-emptive default,” he said. “Our position is very clear, unless there is debt restructuring, we cannot repay.”
A spokesman for the International Monetary Fund said it was monitoring developments very closely and a virtual mission to Sri Lanka is expected to conclude technical talks on a potential loan program on May 24.