The World Bank said on Friday it would not offer new funds to Sri Lanka unless the bankrupt island nation enacted “deep structural reforms” to stabilize its ailing economy.
Sri Lanka has suffered an unprecedented downturn with its 22 million people suffering months of food and fuel shortages, prolonged power outages and runaway inflation.
The South Asian nation defaulted on its $51 billion in foreign debt in April, and major protests earlier this month forced then-President Gotabaya Rajapaksa to flee the country and resign.
The World Bank said it was concerned about the impact of the crisis on the people of Sri Lanka but was unwilling to commit funds until the government committed the necessary reforms.
“Until an appropriate macroeconomic policy framework is in place, the World Bank does not plan to offer new financing to Sri Lanka,” the lender said in a statement.
“This requires deep structural reforms that focus on economic stabilization and also address the fundamental structural causes that caused this crisis.”
The World Bank said it has already diverted $160 million from existing loans to fund much-needed medicines, cooking gas and school meals.
Sri Lanka is currently in bailout talks with the International Monetary Fund, but officials say the process could take months.
The island nation is running out of foreign exchange to finance even its most important imports, and chronic shortages have sparked public anger.
Motorists stand in long lines for days to get rationed petrol and government officials have been ordered to work from home to reduce commuting and save fuel.
The United Nations World Food Program estimates that the crisis has forced five out of six Sri Lankan families to buy poor quality food, eat less or, in some cases, skip meals altogether.
The crisis came to a head on July 9 when tens of thousands of protesters stormed Rajapaksa’s residence, forcing the president to flee to Singapore and resign.
His successor, Ranil Wickremesinghe, has declared a state of emergency and vowed a tough line against “troublemakers”, with several activists involved in leading mass demonstrations arrested this week.
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