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What’s driving the crisis in Sri Lanka? Fatima Gunning explains. 

The entire Sri Lankan Cabinet, including President Gotabaya Rajapaksa, have been forced to announce their resignation after protesters stormed the presidential palace last Saturday. 

 

The massive protests were fuelled by public outrage at what has been described as ‘economic mismanagement’ of the nations’ affairs by the current regime.  

The New York Times reported that the Rajapaksa family had “dominated Sri Lanka’s politics for much of the last two decades”, saying that the government had been run more like a “family business”.

The alleged mismanagement has led to Sri Lanka currently experiencing its worst economic downturn since gaining independence from The British Empire in 1948.

India Express reported that approximately 11.7% of Sri Lanka’s population of 21.92 million “earn less than $3.20 per day”. 

The Asian nation, whose economy heavily relies on the tourism industry, was hit badly by travel restrictions resulting from the covid 19 pandemic.

Observer Research Foundation reported that “in 2018, tourism provided US$ 4.4 billion in earnings to the Sri Lankan economy and contributed to 5.6 percent of the nation’s GDP, but this estimate came down to a paltry 0.8 percent in 2020”. 

A ban on chemical fertilisers is also reported to have had a major impact on the country’s agricultural output, although it was later reversed amid widespread criticism. 

Last April The Guardian reported on the catastrophic effect the ban had on the nation, also citing “​​catastrophic inflation and fuel, food and medicine shortages” as the cause of Sri Lanka’s economic woes.

“For the farmers of Sri Lanka, their problems began in April last year when President Gotabaya Rajapaksa, who now stands accused of pushing the country into financial ruin, implemented a sudden ban on chemical fertilisers.” 

The report detailed how the ban would have pushed farmers out of business at a time when the country did not have enough money to finance the importation of foreign food. 

Domestic production was significantly reduced in a nation that was hitherto an abundant, and according to ResearchGate, surplus food producer:

“The production of rice, the staple diet of the people, has been hovering around the self-sufficiency level after the concerted efforts made during the past sixty years or so”. 

 

The Guardian’s report included accounts from farmers who stated that their harvests were reduced by as much as 50 – 60%. 

Sri Lanka is hugely indebted to foreign investors such as the Asia Development Bank (ABD), Japan, and China respectively. 

Repayments of the foreign debt, reportedly in the sum of $51 billion, came to a halt last April after the country ran out of money. Sri Lanka’s lack of foreign currency reserves cause the country to be unable to  pay for its imports. 

Chinese investment in Sri Lanka, through the so-called “Belt and Road” initiative, accounts for 10% of the overall sum owed. China has responded with some reticence to calls to help ease the crisis after reportedly promising to  “play a positive role” in talks with the International Monetary Fund on a possible emergency loan.” 

The Diplomat reported “China offered to lend more but balked at joining a process that might cut Sri Lanka’s debt, possibly for fear other Belt and Road borrowers that owe tens of billions of dollars will demand the same relief.” 

Officials from the communist superstate have said belt and road lending is “investments not aid”. 

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