Cash-strapped Sri Lanka announced Tuesday it was opening its oil market to foreign competition, a day after chronic fuel shortages forced a nationwide halt to petrol and diesel sales.

The South Asian island country is suffering an unprecedented economic crisis because it cannot afford to import essentials, including enough oil and gas to meet energy needs. 

Lengthy blackouts are now a feature of daily life, while motorists have been forced to wait in daylong queues for scarce supplies of petrol. 

A rationing system has been in effect but on Monday night the government banned fuel sales for two weeks to conserve Sri Lanka's limited stockpiles for emergencies. 

Ministers said the crisis had made it an appropriate time to allow market entry from firms in oil-producing nations "to enable them to import and sell fuel using their funds", a cabinet statement said Tuesday. 

Sri Lanka's oil industry was nationalised in 1961, though a third of the market was granted to a local unit of India's state-owned oil and gas company in 2003. 

Despite the sales ban, long queues of vehicles were seen outside pumping stations on Monday with motorists hoping to top up whenever supplies resumed.

The government has dispatched ministers to Russia and Qatar to source discounted oil, while President Gotabaya Rajapaksa this week met with Moscow's envoy in Sri Lanka to discuss fuel and other imports.

Sri Lanka defaulted on its $51 billion foreign debt in April and is currently in bailout talks with the International Monetary Fund.