Sri Lanka's economy on brink of collapse as troops quell unrest

Sri Lanka's economy will "collapse" unless a new government is urgently appointed, the central bank chief warned Wednesday, as security forces fanned out on the streets to restore order after spasms of mob violence.

Police say nine people have died since Monday, when frustration at a dire economic crisis erupted into clashes between backers and opponents of President Gotabaya Rajapaksa, injuring more than 200.

Opposition parties have refused Rajapaksa's overtures for a unity government to resolve a political deadlock and instead demanded his resignation.

Central Bank Governor Nandalal Weerasinghe said it was critical that a new administration take charge by Friday or the country would suffer a catastrophe.

"The economy will completely collapse and no one will be able to save it," he told reporters.

"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."

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

He said political stability was vital to implement the reforms needed to address Sri Lanka's snowballing debt crisis and the acute shortage of foreign exchange to import essentials.

Security forces have largely curbed public disorder after they were deployed to enforce a nationwide curfew with orders to "shoot on sight" anyone engaged in looting or violence.

"If the situation is not brought under control, there could be total anarchy," a senior security official told AFP on condition of anonymity.

The capital Colombo was almost deserted on Wednesday aside from soldiers manning checkpoints, near the charred remains of buses that had been set alight by anti-government crowds.

With armoured personnel carriers and a heavy security presence, Sri Lanka's military chief addressed a press conference to deny speculation of a looming coup.

"Don't ever think that we are trying to capture power," said Kamal Gunaratne, the secretary of Sri Lanka's defence ministry.

"The military has no such intentions."

A small crowd continued to defy the curfew near the president's seafront office, where a protest camp has for the past month maintained a vigil calling on him to step down.

"We want the whole Rajapaksa clan out because they are so, so corrupt. They have been eating into Sri Lanka like a caterpillar eating into some fruit," activist Kaushalya Fernando told AFP.

In a tweet, Rajapaksa on Wednesday called for "all Sri Lankans to join hands as one, to overcome the economic, social & political challenges".

But the main opposition SJB party reiterated it will not be a part of any government with Rajapaksa still president, even after his brother Mahinda's resignation as prime minister on Monday.

Sri Lankans have been suffering shortages of essential goods, fuel and medicines for months in the island's worst economic downturn since independence in 1948.

The crisis moved into a darker phase on Monday when government supporters with sticks and clubs attacked demonstrators who had been protesting peacefully for weeks demanding the president's resignation.

Mobs then retaliated across the country, torching dozens of homes of ruling-party politicians.

Mahinda Rajapaksa had to be rescued in a pre-dawn military operation on Tuesday and taken to a naval dockyard for safety after protesters tried to storm his official residence.

Echoing the UN rights chief and the European Union, the United States on Tuesday said it was concerned both with the violence and the deployment of the military.

"We stress that peaceful protesters should never be subjected to violence or intimidation, whether that's on the part of the military force or civilian units," State Department spokesman Ned Price told reporters.

India meanwhile was forced to deny social media rumours -- some using old images of Mahinda boarding a helicopter -- that it was helping Rajapaksa family members to flee.

The Indian "High Commission would like to categorically deny speculative reports in sections of media and social media about India sending her troops to Sri Lanka," said a statement.

With vital tourism revenues torpedoed by the pandemic, Sri Lanka last month defaulted on its foreign debt, some of it stemming from Rajapaksa vanity projects built with Chinese loans.

The International Monetary Fund this week began a "virtual mission" of staff-level talks on a possible bailout.

IMF mission chief Masahiro Nozaki said the lender aimed to be "fully prepared for policy discussions once a new government has been formed".