The recent economic crisis in Sri Lanka is already making rounds across the globe. The condition has got so bad that public protests are going on continuously, the price of essentials has skyrocketed and the country is pleading for a Bailout. But, even a simple logic says that such a dire situation can’t come up just like that. Too much goes into the making of such a Disaster. The whole Rajapaksa family is being blamed. So, let’s look into this story with much more detailing.
Read: Article on the History of Goa and its liberation from Portugal
A Brief History of Sri Lanka
Initially, there was no country called Sri Lanka and the region was called Ceylon. The story starts from the time when the British and Portugal were reaching India. Portugal appointed Goa’s first governor in 1505, Francisco de Oliveira. He sent his son to the Maldives for exploration, when he also reached Ceylon. At that time, there were a number of empires fighting each other. Portugal used this opportunity to establish its empire and were followed by the Dutch. After that, even the Britishers jumped into the fray and slowly occupied the whole of Ceylon including Candy by 1815. Slowly, the plantation of tea, coffee and coconut started on the island with the help of migrant labourers from South India. After that, the call for independence started here as well just like many others. Finally, Ceylon got its independence from the British colony in 1948, when many countries across the globe were leaving the colonies. It remained under the dominion status till 1972, after which it also got its name changed to Sri Lanka.
Sneek Peek into the Sri Lankan Politics
In the first national elections, one of the famous names was Don Alwin Rajapaksa. Actually, he wasn’t interested in politics, but his brother Don Mathew was and had a deep connection with the local people. But, after the death of Don Mathew, the local people pleaded and urged Don Alwin to enter politics. Alwin had 9 children and out of which, Mahinda was the one most interested in politics and Gotabaya went into Army. Another popular figure was there Mandanaeke and Alwin were working under him. One day, during one of Mandanaeke’s ‘Janta Durbar’, someone shot him down. Though Alwin was most probable to become the prime minister, Mandanaeke’s wife Sirimavo Bandaranaike at the last moment pressed her name forward and became the first woman prime minister in ANY country. But she lost the next elections. She even tried to bring her daughter Chandrika Kumaratunga, who served as the President from 1994 to 2005. Finally, she retired in 2005 and Mahinda got the opportunity he was craving for years.
The Rise of the Rajapaksa Dynasty
Mahinda fought the elections along with the help of his brother Goatabaya. After winning, he made Gotabaya the defence minister and slowly kept on bringing one Rajapaksa member after another. For once, as many as 40 members of the Rajapaksa were in the cabinet. They even started bringing the next generation of Rajapaksas into the cabinet (the Gandhi family has got a competitor). Corruption too was at a record high as Rajapaksa were the sole gainers from the government. Rajapaksas blindly sided with the army which was on a rampage against the Tamils, during their fight against LTTE (Liberation Tigers of Tamil Eelam). During this many innocents were killed and kidnapped. Even the journalists reporting this were harassed and arrested. Before the 2019 elections, there was a rule that a President can’t run for the third term. So, Rajapaksas simply switched posts and Gotabaya became the President and Rajapaksa the Prime minister.
The Huge Mounted Debt
Sri Lanka is one of the many countries with trade deficits. There is no harm in that as many big countries have it, but there must be a limit till which you will keep the deficit. Sri Lanka didn’t care about that and allowed its Debt-GDP Ratio to go as high as 111%. It was struggling with a huge debt of $51 Billion. This problem was even highlighted by the Asian Development Bank in 2019. It even said that Sri Lanka’s production is inadequate in comparison to its debt. 13 Sri Lankan banks were put on the Negative watch list.
In 2019, Sri Lanka was going for elections and Mahinda was luring the citizens with the promise of tax cuts. The citizens had little idea about th economic situation of the country and never for once thought that how will the country get its revenue after the tax cuts since it is already in huge debt. The government thought that tax cuts will make consumers spend more and increase ‘Consumption’ (the logic is right). But, once the pandemic struck, the consumption also got locked and all the plans got failed.
Organic Farming that proved Unhealthy
Gotabaya made another huge blunder. He banned all chemical fertilizers and pesticides overnight and asked everyone to switch to 100% Organic Farming as it is healthier (again the logic was right). But, the real reason was that he wanted to save dollars that were being spent on purchasing fertilizers. This turned out more disastrous than what critics were thinking. Most of the farmers were not able to cope with organic farming and as a result, production fell drastically. Even something as basic as rice saw its production fall down by 50%. Sri Lanka was forced to IMPORT rice, a crop it was a big producer of before.
Read: My Analysis of the Indian Union Budget 2022-23
The Hit on Tourism
Here, COVID-19 too struck Sri Lanka. Just like other countries, Sri Lanka too suffered a huge economic loss. For worse, its tourism too got impacted heavily. Also, the Easter Bombings that took place in 2018 (where 3 churches and hotels were bombed by local Islamic militants killing 269 people including 45 foreigners), had already scared the tourists. Now, COVID further ensured that tourism finds the dust. Tourism was Sri Lanka’s major source of income and consisted of 13% of the Sri Lankan economy. Tourism fell dramatically from $2.3 million in 2018 (which was the peak year for Sri Lanka) to just $0.17 million in 2020. The revenue from tourism too fell from $7.5 million to $2.8 million.
The Communal Face of Rajapaksa
The main vote bank of Gotabayas is among the Sinhalese Buddhists. So, to please the Rajapaksa government started making decisions keeping their concerns at priority. Now, I just told you about the Easter Bombings. This was followed by huge Anti-Muslim violence across the country. These were being carried out by Sinhalese organizations, which I already said are a huge vote bank for the Rajapaksas. Not just this, social media was widely used to fuel hatred against the Muslims which further worsened the situation. The government was also encouraging an Islamophobic atmosphere.
Distance from India and Closeness to China
Sri Lanka even started moving away from India and even accused India’s RAW of meddling in Sri Lankan elections. Slowly, they started seeing a closer ally in CHINA. China, as we know always tries to provide debts to smaller countries that are asking for it under its Belt and Road Initiative(BRI). So, Sri Lanka borrowed heavily from China to fund the infrastructure and military in India. One of the famous incidents was the Hambantota International Port, which was constructed using debt from China. But, after some time, the government was not able to earn back the revenue from the port, so it sold it to private hands. And…the company which won the purchase bid was a Chinese company (China Merchants Port) for a whopping 99 year Lease (Well…even India is independent on a 99-year lease only..HA HA). Also, Sri Lanka cancelled its contract for the construction of the Eastern Container Terminal (ECT) with India and Japan. This also was allegedly done under Chinese influence.
Pic: The extreme and uncontrollable Inflation in Sri Lanka
The Recipe for a Dire Economy
So, suddenly Sri Lanka’s main revenue sources; agriculture, tourism and remittances all fell down drastically. Keeping in mind, that it was already in huge debt, now it was on a sure-shot path to disaster. Inflation in Sri Lanka started skyrocketing and reached 30%. People were struggling to get even the bare essentials like food and medicine. The government had to devalue the currency making 1 Sri Lankan Rupee equal to $320 falling 32%. Even the newspapers had to reduce to stop their printing because of the acute shortages. Power Cuts became a regular affair and the situation of power cuts became so dire that the officials had to sometimes even switch off the street lights. Not just this, Sri Lanka had to ask all its overseas citizens to send money back to the country.
Foreign reserves are required for purchasing goods from abroad. Sri Lanka is a country which is highly dependent on imports, even for basic goods like food and medicines. The monthly expenditure of people tripled which made the situation further terrible Now, Sri Lanka also started running out of foreign currency because of a fall in remittances as overseas citizens were not able to send back money home. It was left with just $2.3 billion in foreign reserves which was a 70% fall from pre-pandemic times. The situation went so bad that Sri Lanka had just $194 million in total and was left with an import capacity of just 1 MONTH. Its debt fell down to as low as the ‘Near Default’ level. After this investors started diverting their attention and actually fleeing from Sri Lanka.
Pic: Protests demanding Gotabya Rajapaksa’s Resignation
Immense Protests amid Cabinet Shuffling
After being in the blind following the Rajapaksa dynasty, finally, the Sri Lankan public lost their patience. They took to the streets with extreme levels of protests. They no longer wanted to even see the Rajapaksa dynasty and slogans of “Go Gota Go” rang throughout the country. Looking at the immense protests, Sri Lanka even banned social media platforms across the country and declared a Curfew. Many civilians got killed by the security forces which further infuriated the public. Fearing protests, the whole cabinet except the Prime minister and the President resigned. But, the main damages were still there, so the protests continued. The protests exaggerated so much that Mahinda Rajapaksa’s house was attacked and vandalized, luckily he wasn’t there.
Finally, Gotabaya had to keep a stone on his heart and make his brother Mahinda (the more political) resign. But the public needed no less than“Go Gota Go”. To avoid all this chaos, Gotabaya made Ranil Wickremesinghe the prime minister. Though, he holds the record for becoming the prime minister of Sri Lanka for the most time (6), this time his party has only ONE Seat in the Parliament. And, right after being made the PM, he was given the ‘Finance’ portfolio. So, if you are smart enough, you must have got the drill that Rajapaksas only want Wickremsinghe to fix the economy anyhow and they will continue to enjoy power. Whatever be the case, the road is very tough for both Wickremesinghe and Sri Lanka.
Help Pouring for Sri Lanka
Looking at such a situation, help did pour for Sri Lanka. But, their new ‘friend’ was not much active this time. India provided a $500 million package and further helped Sri Lanka by providing 6000 metric tonnes of oil to Lankan Indian Oil Corporation (LIOC). It even signed a credit line of $1 billion and a $400 million currency swap with Sri Lanka to help it. Even Bangladesh helped it with a $200 million package. Sri Lanka had already openly defaulted on its $51 billion loans and still has an outstanding debt of $8.6 million and $86.2 million in interest.
Lessons to learn from the Episode
The first and foremost lesson that we should learn from this episode is that citizens should never become blind followers of any politician. Secondly, we should NEVER encourage Dynasty Politics as it promotes autocracy and incompetency (there are a few exceptions). Thirdly, citizens should get careful of the politicians who use religion as a force and run the country on religious lines. Fourthly, people should stop trusting China, it not just created the virus but is a dangerous Virus in itself. Finally, citizens should keep ECONOMY and real developmental issues as the parameters to vote on. These are the lessons that we can and should learn from this episode. And…however incompetent the Rajapaksa family is, it is the citizens who are the biggest sufferers. So, I genuinely hope that the crisis is sorted out as soon as possible and normalcy returns in Sri Lanka.
