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Thursday, August 18, 2022

Behind the crisis in Sri Lanka – how political and economic mismanagement together plunged the country into turmoil

Sri Lankan President Gotabaya Rajapaksa formally resigned on July 15, 2022, having previously fled the country amid widespread protests in the South Asian nation.

The man who replaced him, Prime Minister and now interim President Ranil Wickremesinghe, is also facing calls to leave amid political and economic turmoil.

Although the drama escalated over a few days – during which both the presidential palace and the prime minister’s residence were occupied by protesters – the crisis was years in the making, argues Neil Devota, professor of politics and international affairs at Wake Forest University. .

The Conversation US asked Devotta, who grew up in Sri Lanka and specializes in South Asian politics, to explain what led to the crisis and where the nation of 22 million goes from here.

Can you talk us through the latest developments?

What happened in Sri Lanka was actually quite revolutionary. For the first time in the country’s history, you resigned from the president – and in the most humiliating way.

Gotabaya Rajapaksa had previously announced his intention to step down, but did not do so immediately, as he would lose his presidential immunity from prosecution once he did. Instead he fled the country, first to the Maldives and then to Singapore. Some claim he is now looking to move to Saudi Arabia – all ironic given that Dubai, Maldives and Saudi Arabia are Muslim states, and during his tenure in power the Islamophobia on Rajapaksa has been encouraged to tighten his lock on power. was accused of doing. ,

The catalyst behind all this was a protest movement. Protesters have since left the official residences of the president and prime minister, but the protest movement has only partially succeeded. They wanted Rajapaksa and his brothers to leave. But many also wanted to remove Prime Minister Wickremesinghe.

A staff member washes away graffiti left by protesters.
Abhishek Chinappa/Getty Images

Instead, Wickremesinghe, who was not elected to parliament and only got one seat through a national list, tops the legislature, has now been sworn in as interim president. So a man without a mandate – his party got only a tiny fraction of the 11.5 million valid votes cast in the 2020 election – is now acting president and could get a full-time job after the Sri Lankan parliament held a secret ballot in July. Is. 20, 2022.

What was the spark of the crisis?

The spark really flared in April 2021 when Rajapaksa announced a ban on fertilisers, herbicides and pesticides.

Successive Sri Lankan governments have long lived beyond their means and are employing a debt rollover strategy to keep the country afloat—in essence, with revenue from tourism and international remittances—to pay off the country’s debt. Also relied on new loans.

But then came COVID-19, which severely affected tourism and contributed to what economists call a “balance of payments crisis”. In other words, the country was unable to pay for essential imports or service its debt. This prompted the government to suddenly announce a ban on herbicides and fertilizers – something they hoped would save the country US$400 million dollars on annual imports. The President had earlier indicated that the move to organic agriculture would happen in 10 years. Instead, it was implemented abruptly, despite warnings about the impact on agricultural yields.

Due to which the farmers protested. They soon joined sympathetic unions. The balance of payments crisis went far beyond agriculture. It reached a point when the government could not pay for almost anything it was hoping to import, leading to shortages of medicines and milk powder. Which was also opposed by the people of other sectors.

On top of this, the government was printing money to pay for the goods. This inevitably led to inflation – which is running above 50%.

The crucial point came when people found that they could no longer pay for cooking gas and fuel. A few weeks ago, the government announced it would only provide fuel for essential services, closing schools and ordering workers to stay at home.

So it was a purely economic crisis?

not enough. While the spark payments crisis was a scourge, I believe that mitigating the mess is a deeply rooted one that has allowed and encouraged corruption, nepotism and short-termism.

Since at least the 1950s, Sri Lanka has been in the grip of Sinhalese Buddhist nationalism. Sinhalese make up about 75% of the population, Tamils ​​make up about 15% and Muslims 10%.

Sinhalese Sri Lankans have long been favorites when it comes to access to universities and government positions. This has harmed not only the minorities of the country but also its governance. This has led to a decline in the way the state functions. Sri Lanka has ended up with a system that disregards merit and is instead rooted in ethnicity – rule by a dominant group. And this has helped in spreading nepotism and corruption.

The fact that the Rajapaksa brothers helped ruthlessly suppress and defeat a three-decade Tamil rebellion strengthened their credibility among Sinhalese Buddhist nationalists and strengthened their grip on power.

That civil war that ended in 2009 also contributed to the current crisis. Through the conflict, the Sri Lankan government ran a national deficit to finance the counterintelligence.

After the war, Rajapaksa wanted to develop the country by building its infrastructure. What the country got instead was “bling infrastructure” – vanity projects, often financed by China, that were riddled with corruption and corruption. One such project is an airport where very few aircraft land or take off. I visited Matala Rajapaksa International Airport in 2015, and the only other people there were students from a school on a field trip. Nothing’s changed since then.

Other such dysfunctional projects include a convention center and cricket ground – called the Mahinda Rajapakse International Cricket Stadium – not far from the Matla airport which is near nothing. And then there is the Lotus Tower, the tallest communication tower in South Asia, which should have had other facilities and was formally opened in 2019 but is out of operation.

The construction of such projects is based on suggestions of corruption. Such projects largely involved Chinese construction companies, which often used Chinese laborers – including Chinese prisoners; in the case of Hambantota port, now leased to China for 99 years as Sri Lanka was its own could not pay the loan. The Sri Lankans themselves have benefited very little.

On paper it seemed that the country was developing and GDP was increasing. But the growth was from external funding rather than goods and services originating in Sri Lanka.

Short-term and high-interest Chinese loans played no small role in exacerbating Sri Lanka’s debt problem. As a result, the country currently owes China $5 billion to $10 billion, and has a total debt of $51 billion.

What will happen next?

The most important thing that Sri Lanka needs to move forward is political stability. Without that, you won’t get the help you need from the international community.

And Sri Lanka is not going to come out of its economic mess without the help of international actors such as the International Monetary Fund, the Asian Development Bank and the World Bank. It also needs help from partners like India, Japan, China and the US.

Anyway, interim President Wickremesinghe has said that the country will face a shortage of goods by the end of 2023.

Sri Lanka needs a massive, long-term economic restructuring. And for that to happen, the government would have to restructure its bilateral debt – the IMF simply wouldn’t give Sri Lanka enough money to pay off its debt to China or any other institution.

But China knows that cutting any debt deal with Sri Lanka would mean that other countries with large Chinese debts, such as Pakistan and some African countries, would expect the same. And Beijing doesn’t want to set that example. China, on the other hand, will most likely have to work with Sri Lanka and other bilateral donors, especially now that Rajapaksa is out of power. It needs to develop goodwill to maintain influence in the island and should not be seen as aggravating Sri Lanka’s woes.

The IMF will also expect painful measures to reduce costs if Sri Lanka is to come to the aid. It is most likely that Sri Lanka floats its currency freely against the dollar, as Sri Lankans currently abroad are using informal channels – not the banking system – to send foreign currency. So it has to devalue its currency which it already has. The IMF will also expect the government to cut the state’s workforce – which currently stands at about 1.5 million people.

This will be a very painful process, and will take some time. And this may further worsen the turmoil of the country in the coming days.

World Nation News Desk
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