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Corruption and mismanagement have left the island nation saddled with debt and unable to pay for basic necessities, while political chaos persists even after the president announced his much-sought resignation. France 24 takes a tour of the different stages of the crisis.
A Sri Lanka with a tropical climate and developing agriculture is not normally short of food. Yet today people are starving.
The United Nations World Food Program says that almost nine out of ten families skip meals or skimp on expenses to get them, while three million receive emergency humanitarian aid.
On June 22, 2022, Prime Minister Ranil Wickremesinghe had anticipated that the economy had already “collapsed” and that the country had a few days left to bottom out. As indeed happened two weeks later.
The political chaos, which has fed on the economic chaos, persists even after the embattled president, Gotabaya Rajapaksa, officially announced that he will step down from office as of next Wednesday. But what contributed to the economic collapse?
Attacks, pandemic and war, an explosive cocktail difficult to digest
Economists say that the crisis is due to internal factors, such as years of administrative mismanagement and corruption. Much of the public anger has focused on President Rajapaksa and his brother, former Prime Minister Mahinda Rajapaksa.
But conditions have been deteriorating in recent years. In 2019, a series of jihadist attacks on churches and hotels killed more than 260 people at Easter. That devastated tourism, a key source of foreign exchange, which has suffered even more in the pandemic.
The government needed more foreign currency as foreign debt soared, but instead Rajapaksa pushed through the biggest tax cuts in history, a move that was recently reversed, but by the time the nation’s credit ratings had dropped, preventing it from borrow more money.
The shortage of essential products, the order of the day
In April 2021, Rajapaksa suddenly banned the import of chemical fertilizers to boost organic farming, taking farmers by surprise and decimating staple rice crops.
At the end of that same year, the authorities were forced to close the only oil refinery to avoid spending a lot of foreign currency on imported crude oil.
The war in Ukraine only aggravated the situation, driving up food and oil prices. Inflation exceeds 47% per year and almost reaches 60% only in food.
Sri Lanka announced in April that it was suspending payments on foreign loans due to a shortage of foreign exchange. Its total external debt amounts to 51,000 million dollars, of which it must pay 28,000 million dollars until the end of 2027.
Meanwhile, the Sri Lankan rupee has weakened and lost 80% of its value in recent months. That drives up import costs, leading to critical shortages of fuel, food and essential medicine.
What’s next?
Sri Lanka and its 22 million people are seeking help from neighbors India and China and from the International Monetary Fund, to which the government is due to submit a debt sustainability plan in August before reaching an agreement.
Other governments such as the United States, Japan and Australia have provided a few hundred million dollars in support.
Doctors have turned to social media to try to obtain critical supplies of equipment and medicine; a growing number of Sri Lankans are seeking passports to seek work abroad; and government workers have been given an extra day off for three months to give them time to grow their own food, with a view to emerging from the crisis.
With Reuters, AP and EFE
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