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Sri Lanka halts fuel supplies for private vehicles

Sri Lanka has banned access to fuel for private vehicles until July 10 as the government tries to remedy a serious shortage on the island amid a worsening economic crisis.

The government announced Monday evening that it would also close schools in urban areas for two weeks and allow fuel only for essential purposes such as medical services, trains and some buses, and vehicles carrying food.

The country of 22 million people is experiencing its worst debt and economic crisis in decades as a foreign exchange shortage has left the government unable to pay off its loans and import basic necessities, including food and medicine. .

Massive protests have pressured President Gotabaya Rajapaksa to resign. Clashes broke out in Colombo, the capital, and elsewhere in the country between supporters and opponents of the government protesters, leaving nine dead and about 300 injured.

The country defaulted on its foreign loans in May after it missed interest payments on two $1.25 billion government bonds, the first Asia-Pacific country to do so in more than two decades.

On Monday, the government cabinet spokesman Bandula Gunawardana told reporters that until July 10, Sri Lanka would only provide fuel to services deemed essential. Schools in urban areas would be closed and everyone was urging people to work from home, he said. The interprovincial bus services would also be stopped.

“Sri Lanka has never experienced such a severe economic crisis in its history,” Gunawardana said.

The national energy regulator said daily power cuts of about two and a half hours would increase to about three or four hours a day.

A man who works as a driver for tourists said he queued for gas for 48 hours late last week and was then allowed to buy only a ration worth LKR 20,000 ($55).

The government is in talks with the IMF about a possible bailout of about $3 billion. An IMF team arrived in Sri Lanka on Monday. Sri Lanka has also requested about $4 billion in financial aid from India and China to import essential items.

Sri Lanka is the largest issuer of high-yield bonds in Asia and an enthusiastic participant in the international infrastructure plan Belt and Road in Beijing. The country owes a total of more than $50 billion to private bondholders and countries, including China, India and Japan.

After the civil war ended in 2009, Sri Lanka became a popular destination for bondholders seeking high-yield investment opportunities, and the Rajapaksa ruling family used debt-funded infrastructure projects to fuel growth.

The island defaulted on its debts after the coronavirus pandemic led to a sharp drop in tourism and analysts say economic mismanagement by Rajapaksa, who cut taxes and banned chemical fertilizers that harm agricultural production.

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