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Sri Lanka’s worst economic crisis since independence has led to fuel and electricity rationing across the South Asian nation of 22 million

The Sri Lankan rupee fell sharply against the dollar Thursday, after the country’s central bank ordered a 15 percent depreciation in a bid to stave off a looming economic collapse sparked by a shortage of foreign currency.

The country’s worst economic crisis since independence has led to fuel and electricity rationing across the South Asian nation of 22 million, crippling public transport and causing long queues for food and medicine.

The coronavirus pandemic battered the island’s tourism sector — a key foreign currency earner — sparking fears the country may not be able to repay its $51 billion foreign debt.

Traders said the rupee Thursday sank 11.53 percent against the US dollar, the island’s main foreign trading currency, as authorities struggled to raise cash to finance desperately-needed oil imports.

The state-run Ceylon Petroleum Corporation (CPC) has asked the government to urgently raise the retail price of oil in a bid to save itself from bankruptcy.

This week’s depreciation added another 198 billion rupees ($760 million) to service the firm’s foreign debt of $3.3 billion, official figures showed.

The Central Bank of Sri Lanka on Monday night announced it would allow “greater flexibility” in the exchange rate, which had been pegged at 197 rupees to the dollar since last April.

But it then backtracked, telling commercial banks that it would not intervene to shore up the rupee.

The remarks led to a sharp depreciation when markets opened on Thursday, traders said, with exporters expecting a further fall in the currency’s value.

The CPC is losing 120 rupees on every litre of diesel sold at the current government-regulated price, chief Sumith Wijesinghe said.

“If we had the authority to increase (the price), we would have done it already,” Wijesinghe told reporters.

The government has said it hopes to soon import $500 million worth of oil under a credit line from India to address the local shortages.

On Wednesday, the government tightened restrictions on a wide range of imports — from whisky to kitchen appliances — to save foreign exchange and finance essential imports such as oil, food and medicines.

An import ban was already introduced in March 2020 on big-ticket items such as cars, in an effort to stop the outflow of dollars needed to pay Sri Lanka’s debts.

Milk powder, sugar, lentils and wheat, as well as medicine, are in short supply.

The International Monetary Fund last week urged Colombo to devalue its currency and raise taxes, warning the cash-strapped country that its foreign debt was “unsustainable”.