In an order issued late on Friday, President Gotabaya Rajapaksa invoked laws that allow the military to arrest and detain suspects without warrants. The state of emergency was necessary to protect public order and to maintain essential supplies and services, he said.
The government on Saturday also announced a 36-hour nationwide curfew from 6pm until 6am on Monday.
Angered by shortages of fuel and other essential items, hundreds of protesters clashed with police and the military outside Mr Rajapaksa's residence on Thursday as they called for him to resign and set fire to several police and army vehicles.
Police arrested 53 people and imposed a curfew in and around Colombo on Friday to contain protests.
Reacting to the state of emergency, US Ambassador to Sri Lanka Julie Chung said in a tweet: “Sri Lankans have a right to protest peacefully — essential for democratic expression. I am watching the situation closely, and hope the coming days bring restraint from all sides, as well as much needed economic stability and relief for those suffering.”
The island nation of 22 million people is grappling with rolling power cuts for up to 13 hours a day as the government scrambles to secure foreign currency to pay for fuel imports.
A vessel carrying 5,500 metric tonnes of cooking gas had to leave Sri Lankan waters after Laugfs Gas, the company that ordered it, was unable to procure $4.9 million in dollars from local banks to pay for it.
“People are struggling with an acute shortage of cooking gas but how can we help them when there are no dollars? We are stuck,” Laugfs Gas chairman W H K Wegapitiya told Reuters.
The crisis — the result of economic mismanagement by successive governments — has been compounded by the Covid-19 pandemic, which has hit tourism and remittances.
It has also marked a sharp turnaround in fortune for Mr Rajapaksa, who swept into power with a majority win in 2019 promising stability.
The government has said it is seeking a bailout from the International Monetary Fund and is also asking for loans from India and China.
In the first major food aid to the country since Colombo secured a credit line from New Delhi, Indian traders have started loading 40,000 tonnes of rice.