Sri Lanka to repay debts after six months: governor

Central Bank of Sri Lanka Governor Nandalal Weerasinghe said there will be no debt servicing until the country was able to restructure its $51-billion external debt.

Protesters shout slogans during an ongoing anti-government demonstration near the president's office in Colombo on 18 April 2022, demanding President Gotabaya Rajapaksa’s resignation over the country's crippling economic crisis. Picture: Jewel SAMAD/AFP

COLOMBO - Sri Lanka will take at least six more months to start repaying its debts, the central bank said on Thursday as the government shut schools because of fuel shortages.

Central Bank of Sri Lanka Governor Nandalal Weerasinghe said there will be no debt servicing until the country was able to restructure its $51-billion external debt.

"We hope to be able to reach an agreement with our creditors in about six months," Weerasinghe said.

"Our position is very clear. Until they come to (a) restructure (agreement), we will not be able to pay."

He said the mob violence that claimed nine lives last week and the government's failure to finalise a finance minister under a new cabinet could delay negotiations with creditors and the IMF.

The governor said bailout talks with the International Monetary Fund were under way, but a final agreement required approval by a finance minister the country is yet to appoint.

Prime minister Mahinda Rajapaksa resigned last week following pressure over the acute economic hardships faced by the 22 million population.

His successor Ranil Wickremesinghe has attempted to cobble together a "unity cabinet", but has inducted only four ministers, all from President Rajapaksa's SLPP party, and none from the opposition.

Wickremesinghe Thursday asked state sector employees to stay at home on Friday and take a long weekend as the country faced an acute shortage of petrol.

The government also closed public schools from Friday because of the fuel crisis which has led to miles-long queues for the scarce fuel stocks at a few pumping stations.

Only a few taxis were operating while most were in queues at the few pumping stations which still dispensed rationed petrol.

In a bid to improve dollar liquidity in commercial banks, the central bank Thursday criminalised the holding of dollar notes by Sri Lankan citizens for longer than two weeks.

Existing laws allowed Sri Lankans to up to $15,000 for three months before depositing in a bank or encashing at the official exchange rate.

In two weeks, the limit will be reduced to $10,000 and the time period the currency could be held will be reduced to two weeks, Weerasinghe said.

Sri Lanka's foreign currency shortage has been at the heart of the current crisis, forcing the government to halt many imports of essential goods.

This has led to galloping inflation, severe shortages and power blackouts in Sri Lanka's worst economic crisis since independence in 1948.