Sri Lanka’s president has agreed to replace his older brother as prime minister in a proposed interim government to solve a political impasse caused by the country’s worst economic crisis in decades, a prominent politician said.

President Gotabaya Rajapaksa agreed that a national council will be appointed to name a new prime minister and Cabinet comprised of all parties in Parliament, politician Maithripala Sirisena said after meeting with the president.

Mr Sirisena, who was president before Mr Rajapaksa, was a governing party politician before defecting earlier this month along with nearly 40 other legislators.

Sri Lanka is near bankruptcy and has announced it is suspending payments on its foreign loans.

It has to repay seven billion US dollars in foreign debt this year, and 25 billion US dollars by 2026.

Its foreign reserves stand at less than one billion US dollars.

The foreign exchange shortage has severely limited imports, forcing people to wait in long lines to buy essentials such as food, fuel, cooking gas and medicine.

Mr Rajapaksa and his family, including prime minister Mahinda Rajapaksa, have dominated nearly every aspect of life in Sri Lanka for most of the last 20 years.

Protesters who have crowded the streets since March hold them responsible for the crisis.