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(Reuters) - The Group of Seven economic powers support efforts to provide debt relief for Sri Lanka, G7 finance chiefs said on Thursday in a draft communique from a meeting in Germany after the country defaulted on its sovereign debt.

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(Reuters) - Sri Lanka's central bank governor said on Thursday he will stay on as head of the bank given an improvement in political stability in the midst of an economic crisis, and he would not step down as he had earlier said he would.

Governor P. Nandalal Weerasinghe also said the Central Bank of Sri Lanka had almost finalised plans to restructure the country's debt and proposals would be submitted to the cabinet soon, possibly by Friday.

Weerasinghe told reporters on May 11 he would resign in two weeks in the absence of political stability as any steps the bank took to address the economic crisis would not be successful amid political turmoil.

Speaking to reporters after his bank announced it was holding its key lending and borrowing rates steady, Weerasinghe said there had been positive political developments.

"Earlier, there was no prime minister and no cabinet. Comparatively there has been significant improvement," he said.

"We now have fresh appointments. We have also seen that our measures are working well. I would like to see a finance minister appointed. Now we are seeing improvement, so I think on that basis I intend to continue," he said.

Opposition parliamentarian Ranil Wickremesinghe was named prime minister last week and he has made four cabinet appointments. However, he is yet to name a finance minister.

The nation of 22 million people is battling a devastating economic crisis as tax cuts by President Gotabaya Rajapaksa drained government coffers, COVID-19 hit the important tourism industry and rising oil prices emptied foreign exchange reserves.

The central bank held rates steady following a massive 7 percentage point increase at its previous meeting and reiterated the need for more fiscal measures and political stability in the crisis-hit economy. read more

Weerasinghe said proposals on debt were nearly ready and could be sent to the Cabinet by Friday for approval.

He also said inflation could rise to 40% in the next couple of months but it was being driven largely by supply-side pressures and measures by the bank and government were already reining in demand-side inflation.

Inflation hit 29.8% in April with food prices expanding by 46.6% year-on-year.

U.S. investment bank JPMorgan backed Sri Lanka's crisis-hit government bonds on Wednesday, saying recent political changes should gradually improve its strains and help its talks with the International Monetary Fund. read more

Sri Lanka is officially now in default as a so-called grace period to make some already-overdue bond interest payments expired on Wednesday.

"We are in pre-emptive default. There can be technical definitions ... From their side they can consider it a default. Our position is very clear, until there is a debt restructure, we cannot repay," Weerasinghe told reporters.

(Reporting by Swati Bhat and Uditha Jayasinghe)

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Prime Minister Ranil Wickremesinghe today (18) said in Parliament that due to the prevailing adverse weather conditions, the LP Gas consignment will now have to be unloaded via lorries causing a delay.

Litro officials said that USD 5 million was paid for a consignment of LP Gas for a ship carrying 3,700 metric tonnes that arrived in Sri Lanka yesterday (17).

 

Accordingly, around 80,000 cylinders were scheduled to be distributed daily from Wednesday (18). However, due to the adverse weather conditions, they are only able to bottle around 8,000 cylinders a day.

 

Prime Minister Wickremesinghe on Sunday (15) held discussions with representatives of the World Bank and the Asian Development Bank on the current economic crisis in the country.

Although the country had received USD 160 million from the World Bank, the Prime Minister said that these funds cannot be used for fuel purchases.

"However, the government is discussing this matter with the World Bank officials and requesting that they allow them to use the funds for urgent purchases of fuel," the Premier told Parliament.

He added that the fertiliser issue is also being addressed as due to the war in Ukraine, there is a global shortage of fertiliser.

Responding to a question from SJB MP Dr. Harsha de Silva, the Prime Minister said that the current information regarding the economy is incomplete and in some instances incorrect, adding that he will provide a full update to the entire Parliament next week. In the meantime, he requested those from the Opposition to come and be briefed on the situation in the next day or two.

Meanwhile, Power and Energy Minister Kanchana Wijesekera speaking in Parliament requested the public to not stay in queues as petrol stocks have nearly been exhausted. He said that petrol would be available for the public by the weekend.

"We haven't received dollars to get a petrol shipment released and the very limited petrol stocks need to be used for essential services. We are sorry for that. Please do not wait in queues as it will take another three days for distribution," the Minister added.

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The Radical Centre founded by the late Minister Mangala Samaraweera has called on the Gotabaya Rajapaksa-Ranil Wickremesinghe administration to release all political prisoners who have been incarcerated for almost thirteen years as Sri Lankan Tamils mark Mullivaikkal Memorial Day today (May 18) commemorating those who died in the civil war that ended in 2009.

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Leader of the United National Party (UNP) Ranil Wickremesinghe is to be sworn-in as the new Prime Minister today (12) with cross-party support in the 225-member parliament, sources at the Presidential Secretariat said.