{"id":124237,"date":"2022-04-12T15:43:16","date_gmt":"2022-04-12T22:43:16","guid":{"rendered":"https:\/\/www.lankaweb.com\/news\/items\/?p=124237"},"modified":"2022-04-12T15:43:16","modified_gmt":"2022-04-12T22:43:16","slug":"how-sri-lanka-landed-in-a-political-and-economic-crisis-and-what-it-means","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2022\/04\/12\/how-sri-lanka-landed-in-a-political-and-economic-crisis-and-what-it-means\/","title":{"rendered":"How Sri Lanka Landed in a Political and Economic Crisis and What It Means"},"content":{"rendered":"
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By \u00a0Niluksi Koswanage\u00a0 Courtesy <\/a>Bloomberg<\/em><\/span><\/h2>\n<\/div>\n\n\n

Sri Lanka\u2019s street protests over soaring inflation and lengthy power cuts have shaken President Gotabaya Rajapaksa\u2019s hold on power, with government ministers resigning<\/a> while the opposition called for fresh elections in the South Asian nation. The political turmoil is complicating efforts to manage the island\u2019s foreign exchange crisis and secure more funds<\/a> to keep its tourism-reliant economy running, having already been hit hard by the Covid-19 pandemic.<\/p>\n\n\n\n

1. How did the crisis start?<\/h3>\n\n\n\n

Rajapaksa carried out populist tax cuts<\/a> in late 2019, reducing revenues just months before the pandemic devastated the economy, with international flights grounded and successive lockdowns ordered. Remittances from overseas Sri Lankan workers dried up as well as many lost their jobs. With foreign-exchange earnings plunging, Sri Lanka struggled to manage its external debt, which had grown in part due to loans from China to fund ambitious infrastructure projects. Even though Sri Lanka has received credit lines from neighbors like India, it has been unable to regularly pay for imports of fuel and essential foods. Making matters worse was Rajapaksa\u2019s pivot last year to organic farming with a ban on chemical fertilizers that triggered farmer protests and saw production of critical tea<\/a> and rice crops decline. <\/p>\n\n\n\n

2. What\u2019s happening to the economy? <\/h3>\n\n\n\n

The $81 billion economy is under severe pressure, with Russia\u2019s invasion of Ukraine raising global oil prices. Sri Lanka\u2019s growth is slow and inflation is at multiyear highs. The authorities have since raised interest rates, devalued the local currency and placed curbs on non-essential imports. But with a meager $2 billion in foreign exchange reserves and $7 billion in debt payments due this year, restoring the country\u2019s economic health remains an uphill battle. Consumer prices rose nearly 19%<\/a> in March from a year earlier, the fastest rate in Asia, after a 15% jump<\/a> in February. <\/p>\n\n\n\n

3. Why are people protesting?<\/h3>\n\n\n\n

Russia’s War in UkraineKeep up with the latest news and the aftermath of one of the worst security crises in Europe since World War II.EmailSign UpBloomberg may send me offers and promotions.By submitting my information, I agree to the Privacy Policy<\/a> and Terms of Service<\/a>.<\/p>\n\n\n\n

Sri Lankans, who voted<\/a> Rajapaksa into the presidency three years ago, are finding themselves in increasingly difficult living conditions. Households and businesses have endured daily power cuts since March, with the duration stretching to 13 hours in April, as the government struggles to pay for energy supplies. There are long lines at gasoline filling stations and daily shortages of essential food items, which if available, are becoming prohibitively expensive. On March 31, protesters clashed<\/a> with police outside Rajapaksa\u2019s private home after a crowd surged past the barricades, screaming for him to step down.<\/p>\n\n\n\n

4. How has the government responded?<\/h3>\n\n\n\n

Rajapaksa, who usually reacts with issuing extraordinary gazettes late at night, declared an emergency and imposed a weekend curfew through April 3. The government also restricted access<\/a> to social media platforms including YouTube, WhatsApp and Facebook for about 13 hours, a move it said was needed to preserve social order. Critics said it was to prevent the protests from spreading. Demonstrations continued despite the curfew as Sri Lankans kept chanting Gota go home,\u201d which became a trending hashtag on Twitter. Rajapaksa, who holds sweeping<\/a> executive powers based on a 2020 constitutional amendment, has reached out to the opposition with an offer to work together to resolve the crises. Opposition leaders were instead talking about holding fresh elections and repealing the amendment. <\/p>\n\n\n\n

5. What\u2019s the bigger picture?<\/h3>\n\n\n\n

The country, off India\u2019s southern tip, has struggled with conflict since gaining independence from Britain in 1948. Civil war between the Sinhalese-dominated government and the separatist Liberation Tigers of Tamil Elam went on for decades and killed 100,000 people. The war ended in 2009 with a government victory — and allegations of human rights violations on both sides. There was a lull in violence until the 2019 Easter Sunday suicide bombing attacks, which killed more than 200 people and the government blamed on a little-known Islamic group. Rajapaksa, a former military officer whom many voters view as a hero of the civil war, was elected president months later. Sri Lanka has also become a battleground in which China and India compete for influence. Rajapaksa and his family members in government have shifted the country closer to Beijing. However with approaching maturities and interest repayments keeping policy makers on their toes, Sri Lanka has reached out to India for aid. On April 12 it\u00a0warned creditors<\/a>\u00a0of a possible default and suspended payments on some foreign debt. The finance ministry also said it would expedite talks with the International Monetary Fund for an aid package. The Rajapaksa government has had a deep-seated reluctance to ask for IMF help since it can involve unpopular austerity measures.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

By \u00a0Niluksi Koswanage\u00a0 Courtesy Bloomberg Sri Lanka\u2019s street protests over soaring inflation and lengthy power cuts have shaken President Gotabaya Rajapaksa\u2019s hold on power, with government ministers resigning while the opposition called for fresh elections in the South Asian nation. The political turmoil is complicating efforts to manage the island\u2019s foreign exchange crisis and secure more funds to keep […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-124237","post","type-post","status-publish","format-standard","hentry","category-politics"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/124237","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=124237"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/124237\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=124237"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=124237"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=124237"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}