Updated: May 3, 2022
After years of conflict, Sri Lanka had looked forward to concrete economic and social progress. Instead, the country’s “post-war success story” has regressed into authoritarian leadership, economic disparity, and weakened institutions. Now, riots plague Sri Lanka’s streets. Protesters are being tear-gassed, students are defying the curfew, and families are rationing food.
This crisis culminated after years of growing debt and government failures. In 2019, the Asian Development bank explained that Sri Lanka constantly imports more than it exports, which has caused trade deficits. At the same time, the government spends more than it receives in revenue, causing a budget deficit. The two-fold budget problem is exacerbated by the large loans Sri Lanka takes from foreign lenders to fund public service projects. Therefore, the country’s debt-to-GDP ratio shot up in the past few years, going up from 85% in 2019 to 104% in 2021.
With the worst-performing currency in the world, the country is also suffering massive inflation; the Sri Lanka rupee has dropped by 32% since January. Because of this, it’s impossible to afford basic necessities. Food, fuel, and electricity are just among the few that Sri Lankans are struggling to pay for. Starvation, medical shortages, and fuel shortages could cause more deaths in Sri Lank than during the pandemic. Accordingly, the Singapore Red Cross warns of an “unprecedented humanitarian crisis.”
In response, thousands of protesters are coming to the streets of the capital, Colombo,, battling with police officers and calling for government action. The most popular demand is the resignation of President Gotabaya Rajapaksa. Gotabaya’s policies, like implementing tax cuts, directly contributed to the crisis. He was also hesitant to seek support from the International Monetary Fund (IMF) earlier this year.
The Rajapaksa family has been in power for the last two decades, and Mahinda Rajapaksa, Gotabaya’s older brother, was credited with ending Sri Lanka’s civil war in 2009. However, both are accused of power grabs, abusing anti-terror laws, censoring dissenters, and violating human rights. Two weeks ago, 26 of Gotabaya’s cabinet members resigned due to the mass protests, including Namal Rajapaksa, Gotabaya’s nephew. Only Mahinda, the current prime minister, kept his seat.
Sri Lanka’s political future is unknown. As of now, Gotabaya refuses to resign. However, his usual methods of tough policing, jailing opponents, and social media blackouts don’t seem to be silencing discontent. The people of Sri Lanka have nothing to lose.
As the World Bank put it, Sri Lanka’s economic future remains uncertain. Sri Lanka will likely receive another IMF loan, putting the total number of IMF loans to the country at 17. This loan will have fiscal conditions, especially policies with the goal of deflation, which would prevent a quick and effective comeback.