Three-wheelers queue to buy petrol due to fuel shortage, amid the country's economic crisis, in Colombo, Sri Lanka, July 5 2022. REUTERS/Dinuka Liyanawatte

According to Sri Lanka, it is insolvent and will have to struggle with an unprecedented economic crisis until the end of next year. The once-prosperous country will slide into a deep recession this year and remain short of food, fuel and medicines, Prime Minister Ranil Wickremesinghe told parliament on Tuesday.

“We will still have difficulties in 2023,” he said. “That’s the reality.”

The country is currently negotiating an aid package with the International Monetary Fund (IMF), Wickremesinghe said. The success of the negotiations depends on whether a debt restructuring plan with which the IMF agrees can be concluded with the creditors by August. “We are now negotiating as a bankrupt country,” added the Prime Minister.

The IMF said last week that Sri Lanka must do more to put its finances in order and fix the budget deficit before an aid package can be launched. In addition, it must fight corruption more vigorously and abolish expensive energy subsidies that have long weighed on the national budget.

Just hours after Wickremesinghe’s comments, the influential Catholic Church in Sri Lanka called for President Gotabaya Rajapaksa to take responsibility for the crisis and resign. Cardinal Malcolm Ranjith said his retention of power was “the greatest obstacle to the liberation of the country.”

Sri Lanka is mired in a devastating financial crisis. The government is unable to finance essential imports such as food, fuel and medicines. Fuel is almost gone and non-essential services have been shut down to conserve fuel. Authorities use armed police and soldiers to guard gas stations.