Sri Lanka to repay debts after six months

Sri Lanka will take at least six more months to start repaying its debts, the central bank said Thursday as the government shut schools because of fuel shortages.

Central Bank of Sri Lanka Governor Nandalal Weerasinghe said there will be no debt servicing until the country was able to restructure its $51-billion external debt.

"We hope to be able to reach an agreement with our creditors in about six months," Weerasinghe said.

He said the mob violence that claimed nine lives last week and the government's failure to finalise a finance minister under a new cabinet could delay negotiations with creditors and the IMF.

The governor said bailout talks with the International Monetary Fund were under way, but a final agreement required approval by a finance minister the country is yet to appoint.

Prime minister Mahinda Rajapaksa resigned last week following pressure over the acute economic hardships faced by the 22 million population.

The government also closed public schools from Friday because of the fuel crisis which has led to miles-long queues for the scarce fuel stocks at a few pumping stations.

In a bid to improve dollar liquidity in commercial banks, the central bank Thursday criminalised the holding of dollar notes by Sri Lankan citizens for longer than two weeks.

This has led to galloping inflation, severe shortages and power blackouts in Sri Lanka's worst economic crisis since independence in 1948.