Sri Lanka's economic crisis spirals, as protesters call for president to resign - Business Leader News

Sri Lanka’s economic crisis spirals, as protesters call for president to resign

Large groups continue to protest in Sri Lanka amid electricity, food, water, medicine and gas shortages.

Sri Lanka no longer has dollar reserves and the country’s currency has dropped by 30% against the US dollar. This has had a knock-on effect on Sri Lanka’s economy and the lives of ordinary people, causing severe shortages and expensive price hikes of important necessities.

Many blame the country’s president, Gotabaya Rajapaksa, for the crisis. Rajapaksa has defied impassioned calls from the public and other ministers to resign from his position. One of his ministers, Johnston Fernando, said that Rajapaksa “will not resign. We will face this. We have the strength to face this. We are not afraid”. Despite this, nearly all cabinet ministers have quit, while opposition ministers have refused to unite with the current president.

On 1 April, Gotabaya imposed a state of emergency which allowed the arrest of protesters without the need for a warrant. However, last Tuesday the law was lifted following an angry backlash from the public and the resignation of several government lawmakers and a finance minister. Earlier in the day, as public tension grew, 41 government ministers left Gotabaya’s coalition government.

Rajapaksa also imposed a social media ban and curfew, but later lifted these after groups continued to protest.

Protests have been largely peaceful since January, however many more people have taken to the streets as power cuts grew to 13 hours and petrol stations ran out of gas. The country now faces its worst economic crisis since gaining independence from British colonial rule in 1948.

The government blames the crisis on the impact Covid-19 had on the country’s tourist industry – an important source of foreign currency for the country. But many have said the crisis has likely been caused by the government’s poor economic mismanagement.

In 2009, Sri Lanka saw the end of a 26-year civil war. After this, the country focused on its own market over exporting – some have claimed this to be a contributing factor to the country’s current situation.

Sri Lanka has now sought help from The International Monetary Fund (IMF), which will amount to an estimated $7 billion. Rajapaksa addressed the nation of 22 million people, saying: “We must take action to increase our foreign exchange reserves. To this end, we have initiated discussions with international financial institutions as well as with our friendly countries regarding repayment of our loan installments.”

Niluka Gunawardene, who attended the recent protests, told Business Leader about the prevailing crisis: “There are endless ques of people in cars, motor bikes, tuk tuks, and farmers holding barrels and petrol cans lining the streets near fuel stations. The government moved to a fuel rationing system given its incapacity to meet basic fuel and energy demands.

“Sri Lanka is experiencing hyperinflation and food inflation is at an all-time high. Low income earners are especially deprived with households not even having basic food rations over the Sri Lankan new year period, which is usually a time of celebration and prosperity. The rapid depreciation of the Sri Lankan rupee over the past week along with restrictions on import credit lines means that there is a rapid depletion of imports including staples like rice, LP Gas, essential medications and milk powder.

“Although the government has reduced the time span of ongoing daily power cuts, there is no convincing long-term plan in place to ensure energy security. Hospitals are buckling under medicine shortages and are only performing essential surgeries.

“There are sit ins, teach ins, resistance art installations, chanting, mindfulness circles and other forms of conscious civil dissent being practiced throughout the country. The stark lack of accountability, entrenched nepotism and unbridled corruption that has shaped post-independence politics in Sri Lanka, especially during the Rajapaksha regimes, are the long-term fault lines that have led to the current crisis.”