Sri Lanka is in economic turmoil, with inflation at 18.7% and food more expensive by 30.2%. Power cuts are rampant, and there is an acute shortage of cooking gas, milk and other essentials. Sri Lanka is a story of a rise and fall, which every nation must note and wisely act.
Sri Lanka and Bangladesh have much in common. Sri Lanka became independent after nearly five months of Indian independence. Bangladesh was relatively younger at 50 years. Bangladesh was burdened with a huge population, and the nation was devastated by the Pakistani army and the Razakars. Sri Lanka had bitter battles with the Tamils in the northern part of the country intermittently between 1983 and 2009 for 21 out of 26 years. Both countries offered low-cost labour and were the choice of Western companies but suffered from volume limitations. China came into the picture and became the world’s factory and became rich, causing hurt to Sri Lanka. With its vast cheap labour, Bangladesh became the world’s largest textile exporter.
With US$ 81 Bn GDP and 111.42% debts, Sri Lanka heavily relied on workers’ remittances, which were 8.85% of their GDP, but Covid, followed by the Russian war on Ukraine, has caused a body blow to the nation. Workers’ remittances were down at US$ 5.49 Bn in 2021, as compared to $7.1 Billion in 2020.
The Rajapaksa family has been hogging the political scenario of Sri Lanka for nearly two decades. Mahinda Rajapaksa’s during his Presidential tenure, dreamt of converting Sri Lanka into another Singapore and began recklessly building infrastructure, borrowing beyond means. The soft term loans, particularly from China, soon ballooned to impossible servicing options, forcing Sri Lanka to surrender ports and airports to China, much to the chagrin of India and the West.
The tourism-dependent country had a blow from the Easter bomb blasts in 2019, reducing tourists inflow by 18%. The Sri Lankan government is now selling its family silver, the prime real estate, to generate funds to meet essential expenses. SL’s Forex reserves have plummeted to $2.36 Bn in January. They must meet external debt obligations of $6.9 Bn for 2022, including International sovereign Bonds of $ 1 Bn in July, which in the current situation looks unlikely to happen. SL bonds due in March 2029 fetch less than 50 cents to a dollar.
The trade gap of $ 562 million in 2020 has widened to $ 1.09 Bn in 2021 and is further widening now. Rajapakse decided to stop imports; in a country dependent on imported raw materials. He has stopped the import of fertilisers, dreaming of 100% organic farming. Such abrupt moves have boomeranged, reducing agriculture by 30% and reducing tea production by almost 50%. With no money, they are into barter deals to survive the situation.
Until recently, Sri Lanka leaned heavily towards China and has pawned its sovereignty. They now remember India at a time of calamity. As a conscientious neighbour, we have helped the island nation with $ 2.4 Billion, including a currency swap of $ 400 Million and a loan deferment of $500 million for two months. In addition, India has given a credit line of $1.0 Billion for procuring food, medicines and other essentials.
Coming back to my Bangladesh comparison, the Bangladeshis remit money to their families and country. As many as 800000 Tamils have survived the genocide by Rajapaksa and have fled Sri Lanka to settle down in France, U.K. or Canada, among many other countries. Over 100000 have been killed. The curse of Tamils is singeing Lanka.
Hungry stomachs cannot be filled by declaring a curfew and using water cannons. The protests are growing, and so is the disenchantment of the Rajapaksa dynasty.
Sampath Kumar
Intrépide Voix
