Sri Lanka economy will 'collapse' if no new govt in 2 days: central bank

Sri Lanka's economy will "collapse beyond  redemption" unless a new government is appointed within two days to restore  political stability, the central bank chief said Wednesday.

He said the latest wave of mob violence derailed the bank's recovery plans,  and the resignation of the prime minister on Monday and the lack of a  replacement were complicating matters.

He said political stability was vital to implementing economic reforms aimed  at addressing the country's debt crisis and the acute shortage of foreign  exchange to import essentials.

"If there is no government in the next two days, the economy will completely  collapse and no one will be able to save it," Central Bank of Sri Lanka  Governor Nandalal Weerasinghe said.

"The country was fast going down a slope when I took over just over a month  ago. I thought we were able to apply the brakes, but with events of Monday  the brakes no longer work.

"Within a week or two the economy will completely collapse. No one will be  able to save Sri Lanka at that stage. My being here as governor will not  help," he said.

"I will resign if there is no immediate action to form a government."

Shortly after taking over last month as the bank's chief, Weerasinghe  announced defaulting on Sri Lanka's $51 billion external debt saying the  country had no money to pay its creditors.

He almost doubled interest rates and allowed the rupee to depreciate rapidly  to ensure better foreign exchange liquidity in the commercial banks.

Sri Lanka is facing its worst economic crisis since independence from Britain  in 1948 after it ran out of dollars to import even the most essentials.

There had been long queues for fuel and food causing severe hardships for the  nation's 22 million people, prompting them to protest against the government.

"If we don't have political stability, very soon we will run out of what  little petrol and diesel left. At that point people will get on the streets  to protest peacefully or violently," Weerasinghe added.

This week, the crisis took an ugly turn with nine people killed in violence  and more than 200 injured.