Sri Lanka may be forced to buy more oil in Russia as the island nation desperately seeks fuel during its unprecedented economic crisis, says the newly appointed prime minister.
Key points:
- There are growing fears of a famine crisis in Sri Lanka
- Moscow has offered Sri Lankan oil and wheat to the South Asian nation
- Sri Lanka’s prime minister says he is also willing to accept more financial aid from China
Prime Minister Ranil Wickremesinghe said he would look for other sources first, but would be open to buying more crude oil in Moscow.
Western nations have largely halted Russia’s energy imports in line with sanctions on war in Ukraine.
Wickremesinghe also indicated that he would be willing to accept more financial aid from China, saying that the war in Ukraine was further exacerbating the crisis in his country and that food shortages could continue until 2024.
He said Russia had also offered to supply wheat to Sri Lanka.
Prime Minister Ranil Wickremesinghe says he feels bad watching his nation suffer. (AP: Eranga Jayawardena)
Sri Lanka struggles with the weight of debt
Wickremesinghe, who is also Sri Lanka’s finance minister, spoke to the Associated Press a day earlier a month after taking office for the sixth time as prime minister.
Appointed by President Gotabaya Rajapaksa to resolve an economic crisis that has nearly drained the country’s foreign exchange reserves, Mr. Wickremesinghe was sworn in after days of violent protests last month that forced his predecessor, Mr. Wickremesinghe. Rajapaksa, Mahinda Rajapaksa, to resign and seek security. angry crowd at a naval base.
Sri Lanka has accumulated $ 51 billion in foreign debt, but has suspended repayment of about $ 7 billion due this year.
The overwhelming debt has left the country without money for basic imports, which means citizens are struggling to access basic necessities such as food, fuel, medicine and even toilet paper and matches.
The shortage has led to power outages and people have been forced to wait days to cook gas and gasoline on lines that stretch for miles.
Anger over the shortage of basic necessities has spread to anti-government protests. (AP: Eranga Jayawardena)
Two weeks ago, the country bought a shipment of 90,000 tons of Russian crude to restart its only refinery, Energy Minister told reporters.
Wickremesinghe did not comment directly on these reports and said he did not know if more orders were pending.
But he said Sri Lanka was in dire need of fuel and was currently trying to get oil and coal from the country’s traditional suppliers in the Middle East.
“If we can [it] get from any other source, we will get [it] from here, ”he said.
“It simply came to our notice then [we] he may have to go back to Russia.
Officials are negotiating with private suppliers, but Mr. Wickremesinghe said the challenge they were facing was that “there is a lot of oil that can be obtained informally in Iran or Russia.”
“Sometimes we may not know what oil we are buying,” he said.
“We are certainly looking at the Gulf as our main supply.”
Since the Russian invasion of Ukraine in late February, world oil prices have skyrocketed.
As Washington and its allies try to cut back on financial flows in support of Moscow’s war effort, Russia offers its crude at a sharp discount, making it extremely attractive to several countries.
Like other South Asian nations, Sri Lanka has remained neutral in the war in Europe.
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Seeking funding in China amid the food crisis
Sri Lanka has received and continues to seek assistance from many countries, including China, the country’s third largest creditor.
Opposition figures have accused the Sri Lankan president and former prime minister of acquiring large sums of Chinese loans for infrastructure projects, which have since failed to generate profits. they have increased the country’s debt.
Critics have also pointed to a harassed port in the hometown of former President Mahinda Rajapaksa, Hambantota, built along with a nearby airport as part of the China Strip Initiative and Route projects, saying they cost too much and they did too little for the economy.
“We need to identify what projects we need for economic recovery and take out loans for those projects, whether from China or others,” Wickremesinghe said.
“Is it a matter of where we deploy resources?”
Wickremesinghe said his government had been talking to China about restructuring its debts.
Beijing had previously offered to lend more money to the country, but was wary of reducing its debt, possibly out of concern that other borrowers would demand the same relief.
“China has agreed to come with other countries to give relief to Sri Lanka, which is a first step,” Wickremesinghe said.
“It simply came to our notice then [on] how the cuts should be made and how they should be done “.
Sri Lanka is also seeking financial assistance from the World Food Program, which could send a team to the country soon, and Wickremesinghe is betting on a bailout package from the International Monetary Fund.
But even if approved, he doesn’t expect to see package money until October.
Space to play or pause, M to mute, left and right arrows to search, up and down arrows for volume. Clock time: 5 minutes 50 seconds 5 m What is causing a global food crisis and the world running out of food? (Rhiannon Stevens)
Wickremesinghe acknowledged that the crisis in Sri Lanka has been “by its own creation”.
Many have blamed it on mismanagement by the government, major tax cuts in 2019, political mistakes that devastated crops, and a sharp drop in tourism due to the coronavirus pandemic.
But Wickremesinghe has stressed that the war in Ukraine, which has caused global supply chains to collapse and fuel and food prices to unattainable levels, has made things much worse.
“Ukraine’s crisis has affected our … economic contraction,” he said, adding that he hoped the economy would shrink further before the country could begin to recover and rebuild itself in coming.
“I think by the end of the year the impact could be seen in other countries,” he said.
“There is a global food shortage. Countries do not export food.”
He said the price of vegetables had tripled in Sri Lanka while his rice crop fell by about a third.
The shortage has affected both the poor and middle classes, provoking months of protests. Mothers struggle to get milk to feed their babies, as fears of an impending hunger crisis grow.
Wickremesinghe said he felt terrible to see his nation suffer, “both as a citizen and as a prime minister.”
He said he had never seen anything like it in Sri Lanka before.
“I’ve generally been in governments where I made sure people had three meals and their incomes increased,” he said.
“We’ve had some difficult times … but not like that. I haven’t seen … people without fuel, without food [before]. “
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AP