Sri Lanka reshuffles cabinet as crisis deepens 

Rising public anger saw protesters gather outside the homes of almost all government members of parliament in the island nation of Sri Lanka, as calls grew for the "government to go home", reports the Daily Mirror. 

Amid the protests, Sri Lanka named a new finance minister as the government began to reshuffle its cabinet to pull the economy out of its worst crisis in decades.

Ali Sabry is set to take over from Basil Rajapaksa as the head of finance, while GL Pieris will continue as the foreign minister, Sudewa Hettiarachchi, Bloomberg reported.

Dinesh Gunawardena and Johnston Fernando, both ministers in the outgoing cabinet, retained their education and highways portfolios in the new team, the president's office said in a statement. A permanent cabinet will be appointed following discussions with all political parties in parliament, it said.

The tweak comes as the island nation continues to struggle with a severe dollar shortage which has resulted in capital controls and import funds.

Various reports have said that the government will soon run out of funds to pay for purchase of essentials, such as food and fuel, in a country which now experiences Asia's fastest inflation – 19%.

Meanwhile,  Sabry and Pieris are part of a team that will oversee debt restructure, key to obtaining support from the IMF.

Elsewhere, Sri Lanka's central bank Governor Ajith Nivard Cabraal said he is resigning, hours after all government ministers offered to step down.

 "In the context of all Cabinet Ministers resigning, I have today submitted my resignation as Governor, @CBSL to HE President Gotabaya Rajapaksa. @GotabayaR #SriLanka #GoSL", Cabraal tweeted.

Whether the president accepted the resignation or not is unclear at this point.

Cabraal had been a staunch supporter of reducing reliance on foreign debt, especially from the Washington-based International Monetary Fund, which is from where Sri Lanka now seeks a bailout.

His announcement also comes a day before the central bank makes a decision on the interest rate. 

Cabraal added to rate hikes -- raising by a total 200 basis points from the pandemic-era low -- to combat inflation that's pushing toward 20% amid risks from Russia's war in Ukraine, the Bloomberg reports.

The IMF last month said Sri Lanka faces a "clear solvency problem" due to unsustainable debt levels, as well as persistent fiscal and balance-of-payments shortages.

Sri Lanka, whose trade deficit doubled to $1.1 billion in December, had about $2.3 billion of foreign-exchange reserves in February and faces a $1 billion dollar bond repayment in July, according to various media reports.

Furthermore, its stock market has seen a 33% slide, making it the world's worst performer this year after Russian equities.

The island's currency is not faring well either – the rupee is the worst performing currency this year.

How did the crisis start

President Gotabaya Rajapaksa, to solidify his support base, carried out populist tax cuts in late 2019, the Bloomberg reports. But the reduction in revenues came months before the pandemic, which grinded economies around the world to a halt.

Remittance from overseas Sri Lankan workers also dried up as many lost their jobs. Soon, Sri Lanka struggled to control its external funds, including the loans it had taken from China to fund ambitious, and according to some detractors "unnecessary", infrastructural projects.

Despite receiving credit lines from neighbours like India, Sri Lanka soon failed to regularly pay for its imports of fuel and essential foods, the Bloomberg reports.

Rajapaksa also decided to ban chemical fertilisers, another populist decision in some quarters, which led to farmer protests and a decline in crucial tea and rice crops.

With the Russian invasion of Ukraine, global oil prices shot up, exacerbating the problem. But rising inflation and a rapidly depleting foreign reserves – $2 billion as of last update with a $7bn payment due this year – means Sri Lanka's climb out of troubled waters will not be easy.

In turn, people took to the streets, protesting the highest inflation in Asia and daily power cuts which can stretch to 13 hours.

Furthermore, gasoline filling stations are seeing long lines, while there is a daily shortage of essentials.

Rajapaksa declared an emergency and imposed a curfew, which has already been defied. Access to social media was also restricted for 13 hours. Opposition leaders had asked for fresh elections in the meantime. 

Meanwhile, protests have continued to grow, reaching international borders.

The Daily Mirror reported that a small group of protesters had gathered outside President Gotabaya Rakapaksa's son's house in Los Angeles.

They said that President Gotabaya must step down and his money be sent back home.  

The Sri Lanka Freedom Party has also decided to quit as a government coalition and will sit independently in Parliament.

The Sri Lankan army has also declared that it stays ready to safeguard the country and abide by the Constitution, an ominous message given the military's constant presence in politics in the island.