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Sri Lanka petrol: Why is the country in an economic crisis? Sri Lanka: Why is the country in an economic crisis?
(8 days later)
Sri Lanka's government says the country has only enough petrol to last one day under regular demand and that it does not have enough foreign currency to import more.
Sri Lanka has had to impose a ban on sales of petrol and diesel for private vehicles as it faces its worst economic crisis in 70 years.
The government is in talks with the International Monetary Fund (IMF) to get a $3bn (£2.5bn) bailout.
Why have fuel sales been suspended?
Sri Lanka doesn't have enough foreign currency to pay for imports, including petrol and diesel.
So, it is halting sales of fuel to ordinary people until 10 July. It's thought to be the first country to do so since the 1970s.
At the weekend, officials said it had less than a week's worth of fuel left for essential services like buses, trains and medical vehicles.
Schools have closed and the country's 22 million residents have been asked to work from home.
Sri Lanka's suffering was avoidable - bank boss
How else have people been affected?
Shortages of food and fuel have caused prices to soar. Inflation is now running at 30%.
There have been power cuts, and the lack of medicines has brought the health system to the verge of collapse.
Protests have spread across the island in recent months.
Why is Sri Lanka's economy in crisis?
Sri Lanka's foreign currency reserves have virtually run dry.
In May it failed to make a payment on its foreign debt for the first time in its history.
The government blames the Covid pandemic, which affected Sri Lanka's tourist trade - one of its biggest foreign currency earners. It also says tourists have been frightened off by a series of deadly bomb attacks on churches in 2019.
However, many experts say economic mismanagement is to blame.
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At the end of its civil war in 2009, Sri Lanka chose to focus more on providing goods to the domestic market, instead of trying to break into foreign ones. So income from exports remained low, while the bill for imports kept growing.
Sri Lanka now imports $3bn (£2.3bn) more than it exports every year, and that is why it has run out of foreign currency.
The cost of living has skyrocketed in Sri Lanka, with food costing up to 30% more than a year earlier
At the end of 2019, Sri Lanka had $7.6bn (£5.8bn) in foreign currency reserves.
By March 2020 this had fallen to $1.93bn (£1.5bn) and recently the government said it had just $50m (£40.5m) left.
The government has also racked up huge debts with countries including China, to fund what critics have called unnecessary infrastructure projects.
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WATCH: Police in Sri Lanka fire tear gas and water cannon at protesters in Kandy Watch: Protesters storm Sri Lankan president's palace in Colombo, swim in the pool and set the PM's house on fire
Much of the popular anger for the economic crisis has been directed at President Gotabaya Rajapaksa and his brother, Mahinda, who he appointed to be prime minister, but dismissed in May. Watch: Protesters storm Sri Lankan president's palace in Colombo, swim in the pool and set the PM's house on fire
President Rajapaksa has been criticised for big tax cuts he introduced in 2019. Finance Minister Ali Sabry has said these lost the government income of more than $1.4bn (£1.13bn) a year. Sri Lanka's president Gotabaya Rajapaksa has said he will step down, after crowds stormed his official residence in the capital, Colombo.
It follows months of protests over soaring prices and a lack of food and fuel.
The country's foreign currency reserves have virtually run dry, meaning it doesn't have enough funds available to buy goods from other countries.
What is happening in Sri Lanka?
The price of everyday goods has risen sharply. Inflation is running at more than 50%.
There have also been widespread power cuts.
A lack of medicines has brought the health system to the verge of collapse.
The country doesn't have enough fuel for essential services like buses, trains and medical vehicles, and officials say it doesn't have enough foreign currency to import more.
This lack of fuel has caused petrol and diesel prices to rise dramatically since the start of the year.
In late June, the government banned the sale of petrol and diesel for non-essential vehicles for two weeks. It's thought to be the first country to do so since the 1970s. Sales of fuel remain severely restricted.
Schools have closed, and people have been asked to work from home to help conserve supplies.
Long queues for fuel - like this one in Colombo - have made normal life impossible
What happens when a country runs out of money?
As well as not being able to buy goods it needs from abroad, in May Sri Lanka failed to make a payment on its foreign debt for the first time in its history.
The country had been given 30 days to come up with $78m (£63m) to cover interest payments, but central bank governor P Nandalal Weerasinghe said it could not pay.
Two of the world's biggest credit rating agencies also confirmed Sri Lanka had defaulted on its debt payments.
Failure to pay debt interest can damage a country's reputation with investors, making it harder for it to borrow the money it needs on international markets. This can further harm confidence in its currency and economy.
Is there a plan to solve the crisis?
Sri Lanka's government has more than $51bn (£39bn) in foreign debt, $6.5bn of which is owed to China, and the two countries are in negotiations about how to restructure the debt.
The G7 group of leading industrial countries - Canada, France, Germany, Italy, Japan, UK and the US - has said it supports Sri Lanka's attempts to reduce its debt repayments.
The Sri Lankan government is also in talks with the International Monetary Fund (IMF) about a possible $3bn (£2.5bn) loan.
The IMF - which works with its 190 member countries to stabilise the world economy - has said the government would have to raise interest rates and taxes as a condition of any deal.
It would also require a stable government to be in place, so it is unclear what can be done until the president officially steps down and a new government is in place.
The World Bank has agreed to lend Sri Lanka $600m, and India has offered at least $1.9bn.
Banging dishes together to protest at the food price hikes.
Prime Minister Wickremesinghe has said the government will print money to pay employees' salaries, but has warned this is likely to boost inflation and lead to further price hikes.
He also said state-owned Sri Lankan Airlines could be privatised.
The country has asked Russia and Qatar to supply it with oil at low prices to help reduce the cost of petrol.
Why is Sri Lanka in economic crisis?
The government blames the Covid pandemic, which affected Sri Lanka's tourist trade - one of its biggest foreign currency earners.
It also says tourists were frightened off by a series of deadly bomb attacks in 2019.
However, many experts blame economic mismanagement.
President Rajapaksa faced widespread calls to step down
At the end of its civil war in 2009, Sri Lanka chose to focus on providing goods to its domestic market, instead of trying to boost foreign trade.
This meant its income from exports to other countries remained low, while the bill for imports kept growing.
Sri Lanka now imports $3bn (£2.3bn) more than it exports every year, and that is why it has run out of foreign currency.
At the end of 2019, Sri Lanka had $7.6bn (£5.8bn) in foreign currency reserves, which have dropped to around $250m (£210m).
President Rajapaksa has also been criticised for big tax cuts he introduced in 2019, which lost the government income of more than $1.4bn (£1.13bn) a year.
How Sri Lanka's war heroes became villains
Sri Lanka's suffering was avoidable - bank boss
The switch to organic fertilisers resulted in widespread crop failure, exacerbating foreign currency shortages
When Sri Lanka's foreign currency shortages became a serious problem in early 2021, the government tried to limit them by banning imports of chemical fertiliser.When Sri Lanka's foreign currency shortages became a serious problem in early 2021, the government tried to limit them by banning imports of chemical fertiliser.
It told farmers to use locally sourced organic fertilisers instead.It told farmers to use locally sourced organic fertilisers instead.
This led to widespread crop failure. Sri Lanka had to supplement its food stocks from abroad, which made its foreign currency shortage even worse.This led to widespread crop failure. Sri Lanka had to supplement its food stocks from abroad, which made its foreign currency shortage even worse.
An IMF report in March this year said the fertiliser ban (reversed in November 2021) also hurt tea and rubber exports, leading to "potentially substantial" losses.
The switch to organic fertilisers resulted in widespread crop failure, exacerbating foreign currency shortages
Does the government have a plan to solve the crisis?
Prime Minister Ranil Wickremesinghe has said the government is now so short of funds that it will be printing money to pay employees' salaries.
He warns this will lead to further price hikes, with inflation rising to 40%.
He also says state-owned Sri Lankan Airlines could be privatised.
Sri Lanka is also asking Russia and Qatar to supply it with oil at low prices.
How much foreign debt must Sri Lanka repay?
Sri Lanka's government has racked up $51bn (£39bn) in foreign debt.
This year, it will be required to pay $7bn (£5.4bn) to service these debts, with similar amounts for years to come. The government is seeking emergency bridging loans of $3bn from the International Monetary Fund (IMF) so it can pay.
The IMF has said the government must raise interest rates and taxes as a condition of any loan.
The World Bank has agreed to lend Sri Lanka $600m.
India has committed $1.9bn and may lend an additional $1.5bn for imports.
The G7 group of leading industrial countries - Canada, France, Germany, Italy, Japan, UK and the US - have said they will provide help to Sri Lanka in securing debt relief.
Sri Lanka owes $6.5bn to China and the two are in talks on how to restructure the debt.