Bankrupt Sri Lanka battles unprecedented economic crisis, opens oil market to foreign firms

Cash-strapped Sri Lanka announced on Tuesday it was opening its oil market to foreign competition, a day after chronic fuel shortages forced a nationwide halt to petrol and diesel sales.

The South Asian island country is suffering an unprecedented economic crisis because it cannot afford to import essentials, including enough oil and gas to meet energy needs.

Sri Lanka is facing an unprecedented economic crisis with less than two days of oil reserves. It is barely able to buy food and essential supplies for its people but the New York Times is worried about them getting a discount on oil from Russia and West's isolation efforts. https://t.co/kuNwrkOzY3

— Rishap Vats (@VatsRishap) June 28, 2022

Lengthy blackouts are now a feature of daily life, while motorists have been forced to wait in daylong queues for scarce supplies of petrol.

A rationing system has been in effect but on Monday night the government banned fuel sales for two weeks to conserve Sri Lanka's limited stockpiles for emergencies.

Ministers said the crisis had made it an appropriate time to allow market entry from firms in oil-producing nations "to enable them to import and sell fuel using their funds", a cabinet statement said Tuesday.

Sri Lanka's oil industry was nationalised in 1961, though a third of the market was granted to a local unit of India's state-owned oil and gas company in 2003.

Despite the sales ban, long queues of vehicles were seen outside pumping stations on Monday with motorists hoping to top up whenever supplies resumed.

Sri Lanka defaulted on its $51 billion foreign debt in April and is currently in bailout talks with the International Monetary Fund.

The government has dispatched ministers to Russia and Qatar to source discounted oil, while President Gotabaya Rajapaksa this week met with Moscow's envoy in Sri Lanka to discuss fuel and other imports.

A US delegation is also in Colombo to assess the country's needs after the United Nations issued a flash appeal to some 1.7 million urgently in need of food support.

President Joe Biden on Tuesday announced a $20 million grant to feed around 800,000 children while at the G7 Summit in Germany.