Situation gets worse

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Amidst Sri Lanka’s fuel crisis, fuelled by a US dollar shortage to make imports, a foreign news agency yesterday quoting officials said the military opened fire to contain rioting at a fuel station.

It said, “Troops fired in Visuvamadu, Mullaitivu, 365km (228 miles) north of Colombo on Saturday night as their guard point was pelted with stones”, Army spokesman Nilantha Premaratne said.

Police said, four civilians and three soldiers were wounded when the Army opened fire for the first time to quell unrest linked to the worsening economic crisis.

As the pump ran out of petrol, motorists began to protest and the situation escalated into a clash with troops, Police said.

Police said clashes involving motorists erupted at three locations over the weekend. At least six constables were wounded in one clash while seven motorists were arrested.

Mullaitivu in the Northern Province is populated with minority Jaffna Tamils who launched a 26- year-old bloody, albeit unsuccessful secessionist war, which nonetheless crippled the economy and left thousands dead and wounded, a number of them, permanently disabled, before it was quelled in 2009.

Therefore, troops firing at unarmed civilians in the North risks reopening old wounds with dire consequences.

Amidst this crisis, Power and Energy Minister Kanchana Wijesekera told the media that Sri Lanka has sufficient diesel for another 10 days from today, while a petrol shipment was expected on Thursday, with the Ceylon Petroleum Corporation refinery releasing 300 metric tons of petrol daily till Wednesday, on which day the Government is expected to receive another crude oil shipment, for which however, GoSL is yet to open a Letter of Credit.

Meanwhile, with miles-long vehicular queues, including motorcycles and three-wheelers seen at almost every fuel station in at least key towns in the island for days up to yesterday, including cooking gas queues,this is not conducive to politico-socioeconomic stability.

Wijesekera said Sri Lanka is negotiating “another” US$ 500 million fuel (excluding LP gas) credit line from India, whilst simultaneously saying India too has its own problems, being a net fuel importer.

However, a silver lining is that India’s External Affairs Minister Dr. S. Jaishankar on Sunday on ‘twitter’ indicated a possible bridging finance from India available to Sri Lanka, until such time an IMF programme is on board in another three-months. (See below)

Jaishankar’s twitter message said, “Chaired a Parliamentary Consultative Committee meeting on the situation in Sri Lanka.

A good discussion held in a positive atmosphere on various issues and India’s role. Unanimous support on the need to stand with our neighbour in this difficult time.”

Coinciding with these developments, IMF’s Press Officer to the region, Ting Yan, in an e-mail on the previous day Saturday said that an IMF team will be in Colombo over 11 days beginning today, with the visit ending on 30 June.

“During the visit they will continue discussions on an economic programme that could be supported by an IMF lending arrangement, building on the progress made during the 9-24 May virtual mission,” said Ting.“We reaffirm our commitment to support Sri Lanka at this difficult time, in line with IMF’s policies,” she added.

It’s learnt that the IMF team will be led by its Senior Mission Chief to Sri Lanka Peter Breuer and will also comprise its mission Chief to SL, Masahiro Nozaki (See also last Sunday’s Finance Today).

Generally such visits are a prelude to an IMF programme (loan), which normally takes another two months to fructify after the end of such a visit. As such an IMF programme is on the cards for Sri Lanka in September.

Consequent to these online virtual meetings, Sri Lanka appointed a Finance Minister (Premier Ranil Wickremesinghe) and during those talks, raised taxes and administered fuel prices including LPG. So an IMF programme is set. But at least in the intervening three-month period, Sri Lanka may need a gross US$ 6 billion worth of bridging finance as its monthly import bill is around $ 2 billion.

Therefore, reaching out to the West is also a sine qua non to bridge India’s bridging deficit urgently, to prevent riots of a catastrophic proportion engulfing the country.