COLOMBO, Sri Lanka — (AP) — Sri Lanka may be forced to buy more oil from Russia as the island nation desperately searches for fuel amid an unprecedented economic crisis, the newly appointed prime minister has said.
Prime Minister Ranil Wickremesinghe said he would look to other sources first, but would be willing to buy more crude from Moscow. Western nations have largely halted energy imports from Russia under sanctions imposed by its war on Ukraine.
In an extensive interview with The Associated Press on Saturday, Wickremesinghe also indicated that he would be willing to accept more financial aid from China, despite his country’s mounting debt. And while acknowledging that Sri Lanka’s current predicament is “on its own”, he said the war in Ukraine was making it even worse – and severe food shortages could continue into 2024. He said that Russia had also offered wheat to Sri Lanka.
Wickremesinghe, who is also Sri Lanka’s finance minister, spoke to the AP at his office in the capital, Colombo, a day before a month after taking office as prime minister for the sixth time. Appointed by President Gotabaya Rajapaksa to address an economic crisis that has nearly drained the country’s foreign exchange reserves, Wickremesinghe was sworn in after days of violent protests last month that forced his predecessor, Rajapaksa’s brother Mahinda Rajapaksa, to step down and take shelter from angry mobs at a naval base.
Sri Lanka has racked up $51 billion in external debt, but has suspended repayment of nearly $7 billion due this year. Crushing debt has left the country without money for basic imports, meaning citizens struggle to access basic necessities such as food, fuel, medicine, even toilet paper and matches. Shortages led to power outages, and people were forced to wait days for cooking gas and gasoline in lines that stretch for miles.
Two weeks ago, the country bought a shipment of 90,000 metric tons (99,000 tonnes) of Russian crude to restart its only refinery, the energy minister told reporters.
Wickremesinghe did not comment directly on this information and said he did not know if any other orders were in the pipeline. But he said Sri Lanka was desperate for fuel and was currently trying to secure oil and coal from the country’s traditional suppliers in the Middle East.
“If we can get other sources, we’ll get from there. Otherwise (we) may have to go back to Russia,” he said.
Officials are negotiating with private suppliers, but Wickremesinghe said one problem they face is that “there is a lot of oil in circulation that can be informally sent back to Iran or Russia.”
“Sometimes we may not know what oil we’re buying,” he said. “We certainly see the Gulf as our main supply.”
Since Russia’s invasion of Ukraine in late February, global oil prices have skyrocketed. As Washington and its allies try to cut financial flows supporting Moscow’s war effort, Russia is offering its crude at a huge discount, making it extremely attractive to a number of countries.
Like some other South Asian countries, Sri Lanka has remained neutral on the war in Europe.
Sri Lanka has received and continues to seek aid from many countries, including the most controversial, China, currently the country’s third largest creditor. Opposition figures have accused the president and former prime minister of taking out a slew of Chinese loans for dazzling infrastructure projects that have since failed to turn a profit, instead adding to the government’s debt burden. country.
Critics also pointed to a beleaguered port in then-president Mahinda Rajapaksa’s hometown of Hambantota, built with an airport nearby as part of China’s Belt and Road Initiative projects, saying that ‘they cost too much and do too little for the economy.
“We need to identify the projects we need for economic recovery and take out loans for those projects, whether from China or others,” Wickremesinghe said. “It’s a question of where do we deploy the resources?
The prime minister said his government had discussed debt restructuring with China. Beijing had previously offered to lend more money to the country, but had been reluctant to reduce the debt, perhaps out of fear that other borrowers would demand the same relief.
“China agreed to come with the other countries to relieve Sri Lanka, which is a first step,” Wickremesinghe said. “That means they all have to agree on how the cuts should happen and in what way they should happen.”
Sri Lanka is also seeking financial aid from the World Food Programme, which could soon send a team to the country, and Wickremesinghe is banking on a bailout from the International Monetary Fund. But even if approved, he doesn’t expect to see the money from the package until October.
Wickremesinghe acknowledged that the crisis in Sri Lanka was of his “own making”. Many blamed government mismanagement, steep tax cuts in 2019, policy mistakes that devastated crops and a sharp drop in tourism due to the coronavirus pandemic. But he also pointed out that the war in Ukraine, which has brought down global supply chains and pushed fuel and food prices to unaffordable levels, has made matters worse.
“The Ukraine crisis has had an impact on our … economic contraction,” he said, adding that he believed the economy would contract even further before the country could begin to recover and rebuild. next year.
“I think by the end of the year you will be able to see the impact in other countries as well,” he said. “There is a global shortage of food. Countries do not export food.
In Sri Lanka, the price of vegetables has tripled while rice cultivation in the country has fallen by about a third, the prime minister said.
The shortages have hit both the poor and the middle classes, sparking months of protests. Mothers are struggling to get milk to feed their babies, as fears of an impending hunger crisis grow.
Wickremesinghe said he felt bad to see his nation suffer, “both as a citizen and as prime minister”.
He said he had never seen anything like it in Sri Lanka – and didn’t think he ever would. “I’ve usually been in governments where I made sure people had three meals and their incomes increased,” he said. “We had some tough times. …but not like this. I haven’t seen… people without fuel, without food.
Associated Press writers Bharatha Mallawarachi and Krishan Francis contributed to this report.
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