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Sri Lanka’s Economy Has ‘Collapsed,’ Prime Minister Says

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Sri Lanka’s economy has “completely collapsed” and an agreement with the International Monetary Fund is the only path to revival, Prime Minister Ranil Wickremesinghe told the parliament on Wednesday.

“We are now facing a far more serious situation beyond mere shortages of fuel, gas, electricity and food,” Wickremesinghe said, adding that the South Asian nation is unable to purchase imported fuel, even for cash, due to heavy debts owed by its petroleum corporation. “We are now seeing signs of a possible fall to rock bottom.”

The gloomy analysis comes as authorities hold talks with the Washington-based lender for an agreement for fresh funds to the bankrupt nation. Sri Lanka needs $6 billion in coming months to prop up its reserves, pay for ballooning import bills and stabilize its currency.

Sri Lanka has concluded the initial discussions with the IMF, and exchanged ideas on public finance, debt sustainability, banking sector and social security, Wickremesinghe said. “We intend to enter into an official level agreement with the IMF by the end of July,” he added.

Authorities also plan to hold a credit aid conference with friendly nations, including India, Japan and China, for further assistance.

Sri Lanka has failed to halt the worst economic crisis it faced in its independent history. Lingering shortages of food, fuel and essentials risk intensifying protests and may hamper political stability further.

On Tuesday, Hamilton Reserve Bank Ltd., which holds more than $250 million of Sri Lanka’s 5.875% International Sovereign Bonds due July 25, filed a suit in a New York federal court seeking full payment of principal and interest after the country defaulted last month.