Sri Lankan Finance Minister Ali Sabry told parliament on Wednesday that the country's current useable foreign reserves were less than $50 million.
Sabry told parliament that Sri Lanka should have sought assistance from the International Monetary Fund (IMF) much earlier and that entering an IMF program would take at least six months, Xinhua news agency reported.
The government should have floated the rupee earlier too, he said.
The Finance Minister added that discussions with several countries to obtain bridging finance are underway.
The Minister said Sri Lanka's foreign useable reserves were at $7 billion by the end of 2019.
Pointing out that the government's tax revenues have decreased to 8.7 per cent of gross domestic product, Sabry added that the budget 2022 is no longer realistic and the government hopes to present a new budget proposal in the parliament soon.
Sri Lanka has been suffering a shortage of foreign exchange with its reserve assets standing at around $1.9 billion at the end of March, of which foreign currency reserves were at $1.7 billion.
Sri Lanka is on the brink of bankruptcy and has suspended payments on its foreign loans. Its economic miseries have brought on a political crisis, with the government facing a protests and a no-confidence motion in Parliament.
The country is due to repay $7 billion this year of the $25 billion in foreign loans it is scheduled to pay by 2026.
“There is a severe risk in front of all of us,” said Sabri. He said Sri Lanka’s reserves stood at $7.6 billion at the end of 2019 and fell to $5.7 billion by the end of 2020 as payments outpaced inflows of foreign currency amid the pandemic.
A severe shortage of foreign currency has left Rajapaksa's government unable to pay for essential imports, including fuel, leading to debilitating power cuts lasting up to 13 hours.
Ordinary Sri Lankans are also dealing with shortages and soaring inflation, after the country steeply devalued its currency last month ahead of talks with the International Monetary Fund (IMF) for a loan programme.
Critics say the roots of the crisis, the worst in several decades, lie in economic mismanagement by successive governments that created and sustained a twin deficit - a budget shortfall alongside a current account deficit.
Sri Lanka had been earmarked for sovereign default, as the remaining foreign reserves of US$1.9 billion as of March 2022 would not be sufficient to pay the country's foreign debt obligations for 2022, with US$4 billion to be repaid.
An International Sovereign Bond repayment of US$1 billion is also due to be paid by the government in July 2022. According to Bloomberg, Sri Lanka has a total of US$8.6 billion in repayments due in 2022, including both local debt and foreign debt.
In April 2022 Sri Lanka announced that it is defaulting making it the first soverign default in Sri Lankan history since gaining independence in 1948.
(with inputs from IANS)