COLOMBO: Sri Lanka's central bank has obtained foreign exchange to pay for fuel and cooking gas shipments that will ease crippling shortages, its governor said on Thursday, but police fired tear gas and water canon to push back student protesters.
Most of Sri Lanka's petrol stations have ran dry as the island nation battles its most devastating economic crisis since independence in 1948.
At some pumps in the commercial capital, Colombo, dozens of people held plastic jerry cans, as troops in combat gear and armed with assault rifles patrolled the streets. The traffic was very light.
Most people were staying at home because of the lack of transport, according to residents.
Hundreds of students carrying black flags marched on the central Fort area of Colombo, chanting slogans against the government. A Reuters witness said that police fired repeated rounds of tear gas and water canon to push them back.
Central bank Governor P Nandalal Weerasinghe told a news conference that adequate dollars had been released to pay for fuel and cooking gas shipments, using US $130 million received from the World Bank and remittances from Sri Lankans working overseas.
He said that the central bank maintained interest rates steady at a policy meeting after a seven percentage point increase in April that it said was working its way through the system.
Weerasinghe said that the country was more politically and economically stable and that he would stay on in his post.
He told reporters on May 11 he would resign in two weeks in the absence of political stability as any steps the bank took to address the economic crisis would not be successful amid turmoil.
The opposition's MP Ranil Wickremesinghe was appointed prime minister last week, and he has made four Cabinet appointments. He has yet to name a finance minister.
Inflation could rise to a staggering 40 per cent in the next couple of months but it was driven by supply-side pressures and measures by the bank and government that were already reining in demand-side inflation, the central bank governor said.
Inflation hit 29.8 per cent in April, with food prices up 46.6 per cent year-on-year.
Sri Lanka's economic crisis has been caused by the confluence of the COVID 19 epidemic battering the tourism-reliant economy, rising oil prices and populist tax cuts by the government of President Gotabaya Rajapaksa and his brother Mahinda, who resigned as prime minister last week.
Other factors include heavily subsidised domestic fuel prices and a decision to ban the import of chemical fertilisers, which has devastated the agriculture sector.