Sri Lanka
Sri Lanka in political vacuum as talks go on amid crisis
Sri Lanka was in a political vacuum for a second day Monday with opposition leaders yet to agree on who should replace its roundly rejected leaders, whose residences are occupied by protesters angry over the country’s deep economic woes.
Protesters remained in President Gotabaya Rajapaksa’s residence, his seaside office and the prime minister’s official home, which they stormed on Saturday demanding the two leaders step down. It marked the most dramatic day of protests during three months of a relentless crisis that has pushed many to the brink to despair amid acute shortages of fuel, food, medicine and other necessities.
The protesters, who come from all walks of life, vowed to stay put until the resignations of the leaders are official.
Prime Minister Ranil Wickremesinghe said Saturday he would leave office once a new government is in place, and hours later the speaker of Parliament said Rajapaksa would step down Wednesday.
Wickremesinghe’s office said Monday that Rajapaksa had confirmed his earlier decision to resign on Wednesday.
Also Monday, a group of nine Cabinet ministers announced they will quit immediately to make way for an all-party government, outgoing Justice Minister Wijayadasa Rajapakshe said. Wickremesinghe’s office said meanwhile that another group that met the prime minister decided to stay on until a new government is formed.
The president hasn’t been seen or heard publicly since Saturday and his location is unknown. But his office said Sunday that he ordered the immediate distribution of a cooking gas consignment to the public, suggesting that he was still at work.
Opposition party leaders have been in discussion to form an alternative unity government, an urgent requirement of a bankrupt nation to continue discussions with the International Monetary Fund for a bailout program.
Lawmaker Udaya Gammanpila said the main opposition United People’s Front and lawmakers who have defected Rajapaksa’s ruling coalition have had discussions and agreed to work together. Main opposition leader Sajith Premadasa and Dullas Alahapperuma, who was a minister under Rajapaksa, have been proposed to take over as president and prime minister and have been asked to decide on how to share the positions before a meeting with the parliamentary speaker later Monday.
“We can’t be in an anarchical condition. We have to somehow reach a consensus today,” Gammanpila said.
Read: Sri Lanka opposition meets to name new gov’t amid turmoil
Opposition parties are also concerned over military leaders making statements about public security in the absence of a civil administration.
Lawmakers have discussed Chief of Defense Staff Gen. Shavendra Silva’s statement over the weekend calling on people’s cooperation to maintain law and order, said Kavinda Makalanda, spokesperson for Premadasa.
“A civil administration is the need, not the military in a democratic country,” Makalanda said.
If opposition parties fail to form a government by the time Rajapaksa resigns, Wickremesinghe as prime minister will become acting president under the constitution. However, in line with the protesters’ demand, opposition parties are keen on not allowing him take over even as acting president.
They say Wickremesinghe should promptly resign and allow Speaker Mahinda Yapa Abeywardena take over as acting president — the next in line according to the constitution.
Rajapaksa appointed Wickremesinghe as prime minister in May in an effort to solve the shortages and start economic recovery. But delays in alleviating the shortages of basic supplies has turned public anger against him with protesters accusing him of protecting the president.
Wickremesinghe had been part of crucial talks with the IMF for a bailout program and with the World Food Program to prepare for a predicted food crisis. The government must submit a plan on debt sustainability to the IMF in August before reaching an agreement.
Sri Lanka is relying on aid from India and other nations as leaders try to negotiate a bailout with the IMF. Wickremesinghe said recently that negotiations with the IMF were complex because Sri Lanka was now a bankrupt state.
Sri Lanka announced in April that it was suspending repayment of foreign loans due to a foreign currency shortage. Its total foreign debt amounts to $51 billion, of which it must repay $28 billion by the end of 2027.
Months of demonstrations have all but dismantled the Rajapaksa political dynasty, which has ruled Sri Lanka for most of the past two decades but is accused by protesters of mismanagement and corruption.
Sri Lanka president, PM to resign after tumultuous protests
Sri Lanka’s president and prime minister agreed to resign Saturday after the country’s most chaotic day in months of political turmoil, with protesters storming both officials’ homes and setting fire to one of the buildings in a rage over the nation’s severe economic crisis.
Prime Minister Ranil Wickremesinghe said he will leave office once a new government is in place, and hours later the speaker of Parliament said President Gotabaya Rajapaksa would step down Wednesday. Pressure on both men grew as the economic meltdown set off acute shortages of essential items, leaving people struggling to buy food, fuel and other necessities.
Police had attempted to thwart promised protests with a curfew, then lifted it as lawyers and opposition politicians denounced it as illegal. Thousands of protesters entered the capital, Colombo, and swarmed into Rajapaksa’s fortified residence. Video images showed jubilant crowds splashing in the garden pool, lying on beds and using their cellphone cameras to capture the moment. Some made tea, while others issued statements from a conference room demanding that the president and prime minister go.
It was not clear if Rajapaksa was there at the time, and government spokesman Mohan Samaranayake said he had no information about the president’s movements.
Protesters later broke into the prime minister’s private residence and set it on fire, Wickremesinghe’s office said. It wasn’t immediately clear if he was there when the incursion happened.
Earlier, police fired tear gas at protesters who gathered in the streets to march on the presidential residence, waving flags, banging drums and chanting slogans. In all, more than 30 people were hurt in Saturday’s chaos.
Speaker Mahinda Yapa Abeywardena said in a televised statement that he informed Rajapaksa that parliamentary leaders had met and decided to request he leave office, and the president agreed. However, Rajapaksa will remain temporarily to ensure a smooth transfer of power, Abeywardena added.
Read: Why Sri Lanka’s economy collapsed and what’s next
“He asked me to inform the country that he will make his resignation on Wednesday the 13th, because there is a need to hand over power peacefully,” Abeywardena said.
“Therefore there is no need for further disturbances in the country, and I urge everyone for the sake of the country to maintain peace to enable a smooth transition,” the speaker continued.
Opposition lawmaker Rauff Hakeem said a consensus was reached for the speaker of Parliament to take over as temporary president and work on an interim government.
Wickremesinghe announced his own impending resignation but said he would not step down until a new government is formed, angering protesters who demanded his immediate departure.
“Today in this country we have a fuel crisis, a food shortage, we have the head of the World Food Program coming here and we have several matters to discuss with the IMF,” Wickremesinghe said. “Therefore, if this government leaves there should be another government.”
Wickremesinghe said he suggested to the president to have an all-party government, but did not say anything about Rajapaksa’s whereabouts. Opposition parties were discussing the formation of a new government.
Rajapaksa appointed Wickremesinghe as prime minister in May in the hope that the career politician would use his diplomacy and contacts to resuscitate a collapsed economy. But people’s patience wore thin as shortages of fuel, medicine and cooking gas only increased and oil reserves ran dry. Authorities have also temporarily shuttered schools.
The country is relying on aid from India and other nations as leaders try to negotiate a bailout with the International Monetary Fund. Wickremesinghe said recently that negotiations with the IMF were complex because Sri Lanka was now a bankrupt state.
Sri Lanka announced in April that it was suspending repayment of foreign loans due to a foreign currency shortage. Its total foreign debt amounts to $51 billion, of which it must repay $28 billion by the end of 2027.
Read: Sri Lanka holds its breath as new PM fights to save economy
Months of demonstrations have all but dismantled the Rajapaksa political dynasty, which has ruled Sri Lanka for most of the past two decades but is accused by protesters of mismanagement and corruption. The president’s older brother resigned as prime minister in May after violent protests saw him seek safety at a naval base.
With fuel costs making other forms of travel impossible for many, protesters crowded onto buses and trains Saturday to get to the capital, while others made their way on bicycles and on foot. At the president’s seaside office, security personnel tried in vain to stop protesters who pushed through fences to run across the lawns and inside the colonial-era building.
At least 34 people including two police officers were hurt in scuffles. Two were in critical condition, while others sustained minor injuries, according to an official at the Colombo National Hospital who spoke on condition of anonymity as he was not authorized to talk to the media.
Privately owned Sirasa Television said at least six of its workers, including four reporters, were hospitalized after being beaten by police while covering the protest at the prime minister’s home.
Sri Lanka Medical Council, the country’s top professional body, warned that hospitals were running with minimum resources and would not be able to handle any mass casualties from the unrest.
Protest and religious leaders said Rajapaksa has lost his mandate and it is time for him to go.
“His claim that he was voted in by the Sinhala Buddhists is not valid now,” said Omalpe Sobitha, a prominent Buddhist leader. He urged Parliament to convene immediately to select an interim president.
U.S. Ambassador to Sri Lanka Julie Chung on Friday asked people to protest peacefully and called for the military and police “to grant peaceful protesters the space and security to do so.”
“Chaos & force will not fix the economy or bring the political stability that Sri Lankans need right now,” Chung tweeted.
Sri Lanka imposes curfew as cops fire tear gas at protesters
Police imposed a curfew in Sri Lanka’s capital and surrounding areas on Friday, a day before a planned protest demanding the resignations of the country’s president and prime minister because of the economic crisis that has caused severe shortages of essential goods and disrupted people’s livelihoods.
Hours before the curfew announcement, police fired tear gas and water cannons to disperse thousands of protesting students wearing black clothes, holding black flags, shouting anti-government slogans and carrying banners saying “Enough — now go.”
The protesters and other critics have said that President Gotabaya Rajapaksa is responsible for the economic crisis, the worst since the country's independence in 1948. They also blame Ranil Wickremesinghe, who became prime minister two months ago, for not delivering on promises to end the shortages.
Civic and opposition activists have announced that thousands more protesters will gather in Colombo on Saturday. But the police announcement of the curfew said it took effect at 9 p.m. and will last until further notice in Colombo and its suburbs.
The curfew announcement drew criticism from government opponents and the Bar Association of Sri Lanka, which said the “curfew is blatantly illegal and a violation of the fundamental rights.”
The bar association statement asked police to immediately withdraw what the association called an "illegal order” imposing the curfew.
Opposition leader Sajith Premadasa called the curfew“a fraud."
Read: Sri Lanka PM says talks with IMF difficult due to bankruptcy
“Get on to the streets tomorrow. Defy the dictatorship and join with the people to make democracy victorious. Yes we can,” he said in a tweet.
The U.S. Ambassador to Sri Lanka, Julie Chung, asked people to protest peacefully and asked the military and police “to grant peaceful protestors the space and security to do so.”
“Chaos & force will not fix the economy or bring the political stability that Sri Lankans need right now,” Chung said in a tweet.
Sri Lanka is nearly bankrupt and has suspended repayments of $7 billion in foreign debt due this year. It must pay back more than $5 billion annually until 2026. Its foreign reserves are nearly wiped out and it is unable to import food, fuel, cookng gas and medicine.
A lack of fuel to run power stations has resulted in extended daily power cuts. People must stand in lines for hours to buy fuel and gas. The country has survived mostly on credit lines extended by neighboring India to buy fuel and other essentials.
Because of the economic crisis, inflation has spiked and prices of essentials have soared, dealing a severe blow to poor and vulnerable groups.
Due to the fuel and power shortages, schools have been shut for weeks and the government has asked state employees other than those in essential services to work from home.
The country is negotiating with the International Monetary Fund on a bailout package, but Wickremesinghe said this week that the negotiations are difficult because Sri Lanka is effectively bankrupt. He earlier said the country’s economy had “collapsed.”
The economic crisis has triggered a political upheaval, with widespread anti-government protests. Protesters have blocked main roads to demand fuel, and people in some areas have fought over limited stocks.
Also read: With no fuel and no cash, Sri Lanka keeps schools closed
In Colombo, protesters have occupied the entrance to the president’s office for nearly three months to demand his resignation. They accuse him and his powerful family, which includes several siblings who until recently held Cabinet positions, of precipitating the crisis through corruption and misrule.
Months of protests have nearly dismantled the Rajapaksa political dynasty that has ruled Sri Lanka for most of the past two decades.
One of Rajapaksa’s brothers resigned as prime minister last month, and two other brothers and a nephew quit their Cabinet posts earlier.
President Rajapaksa has admitted he did not take steps to head off the economic collapse early enough, but has refused to leave office. It is nearly impossible to oust presidents under the constitution unless they resign on their own.
Sri Lankans storm president's house, office in biggest rally
Sri Lankan protesters stormed President Gotabaya Rajapaksa’s residence and nearby office on Saturday as tens of thousands of people took to the streets of the capital Colombo in the biggest demonstration yet to vent their fury against a leader they hold responsible for the island nation’s worst economic crisis.
It was not clear if Rajapaksa was inside his residence but footage showed hundreds of people inside the well-fortified house and on the grounds outside, some taking a dip in the garden pool and others in a jubilant mood.
A government spokesman, Mohana Samaranayake, said he had no information about Rajapaksa's whereabouts.
Sri Lanka’s economy is in a state of collapse, muddling through with aid from India and other countries as its leaders try to negotiate a bailout with the International Monetary Fund. The economic meltdown has led to severe shortages of essential items, leaving people struggling to buy food, fuel and other necessities.
The turmoil has led to months of protests, which have nearly dismantled the Rajapaksa political dynasty that has ruled Sri Lanka for most of the past two decades.
The president’s older brother resigned as prime minister in May after violent protests saw him seek safety at a naval base, while three other Rajapaksa relatives had quit their Cabinet posts earlier. Much of the public ire has been pointed at the Rajapaksa family, with protesters blaming them for dragging Sri Lanka into chaos with poor management and allegations of corruption.
A new prime minister, Ranil Wickremesinghe, took over in May to help steer the country out of the crisis. Meanwhile, Rajapaksa has held on to power despite growing calls for him to quit.
On Saturday, as droves of people broke through barriers to occupy the president’s residence, hundreds of protesters, some carrying national flags, also stormed his seaside office in another nearby building. Demonstrators have camped outside the entrance to his office for the past three months.
Videos posted on social media showed protesters storming the residence, chanting “Gota go home,” calling the president by his nickname. Dozens were seen jumping into the pool, milling about the house and and watching television. Outside the building, barricades were overturned and a black flag was hoisted on a pole.
At the president’s office, security personnel tried to stop demonstrators who pushed through fences to run across the lawns and inside the colonial-era building.
At least 34 people including two police officers were wounded in scuffles as protesters tried to enter the residence. Two of the injured are in critical condition while others sustained minor injuries, said an official at the Colombo National Hospital who spoke on condition of anonymity as he was not authorized to speak to the media.
Thousands of protesters entered the capital from the suburbs earlier on Saturday after police lifted an overnight curfew. With fuel supplies scarce, many crowded onto buses and trains to come to the city to protest, while others made their way on bicycles and on foot.
Last month, Wickremesinghe said the country’s economy has collapsed. He said that the negotiations with the IMF have been complex because Sri Lanka was now a bankrupt state.
In April, Sri Lanka announced it is suspending repaying foreign loans due to a foreign currency shortage. Its total foreign debt amounts to $51 billion of which it must repay $28 billion by the end of 2027.
Police had imposed a curfew in Colombo and several other main urban areas on Friday night but withdrew it Saturday morning amid objections by lawyers and opposition politicians who called it illegal.
U.S. Ambassador to Sri Lanka Julie Chung on Friday asked people to protest peacefully and called for the military and police “to grant peaceful protesters the space and security to do so.”
“Chaos & force will not fix the economy or bring the political stability that Sri Lankans need right now,” Chung said in a tweet.
Sri Lanka's central bank raises key rates to curb inflation
Sri Lanka’s Central Bank has raised its key interest rates to their highest levels in more than 20 years to try to contain inflation that has added to the country’s economic woes.
Recent price hikes have been a severe blow, especially for the South Asian country’s poor and vulnerable groups as they endure their country’s worst economic crisis in memory, struggling with acute shortages of essentials such as food, fuel, cooking gas and medicines.
Two weeks ago, Prime Minister Ranil Wickremesinghe told lawmakers the economy had “collapsed." On Wednesday, he announced he had called Russian leader Vladimir Putin to request credit support to help the country import fuel.
Also read: Sri Lanka PM says talks with IMF difficult due to bankruptcy
The central bank said it had raised its Standing Deposit Facility Rate by 100 basis points to 14.50%. The move is expected to help draw more funds into the banking sector. It also raised the Standing Lending Facility Rate that it charges commercial banks by 100 basis points, to 15.50%.
Those rates were last that high in 2001.
The bank said it expects to tighten its monetary policy further to fully curb inflation, which rose to nearly 55% in June, while food inflation topped 80%.
The bank raised its policy rates by 700 basis points each in April, roughly doubling them and surprising economists as it struggled to drive inflation lower. Earlier, Fitch Solutions Country Risk & Industry Research forecast that it would push the Standing Deposit Facility Rate to 16.50% and the Standing Lending Facility Rate to 17.50% by the year’s end.
“Our priority is to bring down inflation to at least a reasonable level as soon as possible. The sooner the better,” said the central bank governor, Nandalal Weerasinghe.
Many central banks, most notably the U.S. Federal Reserve, have been raising interest rates to prevent inflation from spiraling out of control. But Sri Lanka faces troubles on a different scale.
Also read: With no fuel and no cash, Sri Lanka keeps schools closed
“What the central bank has done is a measure in the right direction, but it's too short given the high inflation rate of 55 per cent right now which will accelerate to more than 80 to 100 per cent in the next two to three months,” said W.A. Wijewardena, an economist and former deputy governor of Sri Lanka's Central Bank.
Prices of most essentials have tripled in recent months and the most people are struggling to pay for their basic needs. About 70% of Sri Lankan households surveyed by UNICEF in May reported cutting back on food consumption. Many families rely on government rice handouts and charitable donations.
The central bank said Sri Lanka’s economy is estimated to have contracted 1.6% from a year earlier in the first quarter of the year. Shortages of fuel and electricity have further crimped economic activity in April-June.
Even though the economy already has slowed, the interest rate hikes would help temper expectations for further price increases, helping bring inflation down to a target of 6%-7%, the central bank said in a statement.
Due to the acute fuel and power shortages, Sri Lanka has kept schools shut for weeks, while the government has asked state employees other than those in essential services to work from home.
This week, daily three-hour power cuts went into effect.
Strapped by dwindling foreign reserves, Sri Lanka has suspended repayment on foreign debts worth about $7 billion that were due this year.
The country is negotiating with the International Monetary Fund on a bailout package, but Wickremesinghe, the prime minister, said this week that negotiations were proving complex and difficult because Sri Lanka is effectively bankrupt.
The economic meltdown has triggered a political crisis, with widespread anti-government protests erupting across the country. Protesters have blocked main roads to demand gas and fuel, and television stations showed people in some areas fighting over limited stocks.
In the capital, Colombo, protesters have been occupying the entrance to the president’s office for more than two months to demand President Gotabaya Rajapaksa’s resignation. They accuse him and his powerful family, which includes several siblings who until recently held top government positions, of precipitating the crisis through corruption and misrule.
Sri Lanka PM says talks with IMF difficult due to bankruptcy
Sri Lanka’s negotiations with the International Monetary Fund are more complex and difficult than in the past because it is a bankrupt nation, the country’s prime minister said Tuesday.
Prime Minister Ranil Wickremesinghe told lawmakers that recent discussions with a visiting IMF mission were fruitful but not as straightforward as in the past.
“Our country has held talks with the IMF on many occasions before. But this time the situation is different from all those previous occasions. In the past, we have held discussions as a developing country," Wickremesinghe said.
Read: With no fuel and no cash, Sri Lanka keeps schools closed
“But now the situation is different. We are now participating in the negotiations as a bankrupt country. Therefore, we have to face a more difficult and complicated situation,” he said in explaining a roadmap for recovery from Sri Lanka's worst economic crisis in memory.
The crisis has resulted in acute shortages of essentials, food, fuel, cooking gas and medicines forcing people to stay in long lines to buy the limited supplies. The government has shut schools and asked employees other than those in essential services to work from home.
Wickremesinghe said earlier that a preliminary agreement has been submitted to the IMF's board of directors for approval. “But due to the state of bankruptcy our country is in, we have to submit a plan on our debt sustainability to them separately. Only when they are satisfied with that plan can we reach an agreement at the staff level. This is not a straight-forward process,” said Wickremesinghe.
He said Sri Lanka's financial legal advisors are working on a debt sustainability report to be submitted in August.
Discussions are underway with India, Japan and China to form an aid consortium once a staff-level agreement with the IMF is reached, Wickremesinghe said.
Sri Lanka suspended repayment on foreign debts worth about $7 billion that were due this year because its foreign exchange levels fell to record lows. The country's total foreign debt is $51 billion, $28 billion of which must be repaid by 2027, an average repayment of about $5 billion a year.
Read: Gas lines and scuffles: Sri Lanka faces humanitarian crisis
Frustrated people have been holding street protests for months and often scuffle among themselves and with police at fuel stations.
Wickremesinghe said the Central Bank is forecasting an economic contraction of 4% to 5% this year. The IMF estimates Sri Lanka's economy will shrink 6% to 7%.
Sri Lanka's economy has been gutted by the pandemic, which compounded longstanding problems of economic mismanagement. It's GDP fell to $76.2 billion in 2021, down from $94.4 billion in 2018 and won't recover to the level it was at in 2018 until 2026, Wickremesinghe said. He said one government target was to achieve minus 1% growth by the end of next year.
With no fuel and no cash, Sri Lanka keeps schools closed
Cash-strapped Sri Lanka on Sunday extended school closures for one week because there isn't enough fuel for teachers and parents to get children to classrooms, and the energy minister appealed to the country's expatriates to send money home through banks to finance new oil purchases.
A huge foreign debt has left the Indian Ocean island with none of the suppliers willing to sell fuel on credit. The available stocks, sufficient for only several days, will be provided for essential services, including health and port workers, public transport and food distribution, officials said.
”Finding money is a challenge. It’s a huge challenge,” Power and Energy Minister Kanchana Wijesekera told reporters.
Read: Gas lines and scuffles: Sri Lanka faces humanitarian crisis
He said the government has ordered new fuel stocks and the first ship with 40,000 metric tons of diesel is expected to arrive on Friday while the first ship carrying gasoline would come on July 22.
Several other fuel shipments are in the pipeline. But he said authorities are struggling to find $587 million to pay for the fuel. Wijesekera said that Sri Lanka owed about $800 million to seven fuel suppliers.
Last month, schools were closed nationwide for a day due to fuel shortages and had remained closed for the last two weeks in urban areas. Schools will remain shut until Friday.
Authorities also announced countrywide power cuts of up to three hours a day from Monday because they can’t supply enough fuel to power generating stations. Sweeping power cuts have been a blight on Sri Lanka's economy for months, along with severe shortages of essentials including cooking gas, medicine and food imports.
Wijesekera said the main problem is the lack of dollars and appealed to some 2 million Sri Lankans working abroad to send their foreign exchange earnings home through banks instead of informal channels.
He said workers’ remittances, which usually stood at $600 million per month, had declined to $318 million in June.
According to the Central Bank, the remittances — the nation’s main foreign exchange earner — dropped from $2.8 billion in the first six months of 2021 to $1.3 billion in the same period this year for a decline of 53%.
Read: Senior US officials visit Sri Lanka to help resolve crisis
The drop came after the government last year ordered the mandatory conversion of foreign currency. It said that black-market premiums have led people to hoard foreign currency.
Sri Lanka's has been getting most of its fuel needs from neighboring India, which provided it with a credit line. The government said it was also negotiating with suppliers in Russia and Malaysia.
Sri Lanka has suspended repayment of about $7 billion in foreign loans due this year out of $25 billion to be repaid by 2026. The country’s total foreign debt is $51 billion.
The economic meltdown has triggered a political crisis with widespread anti-government protests erupting across the country. Protesters have blocked main roads to demand gas and fuel, and television stations showed people in some areas fighting over limited stocks.
In the capital, Colombo, protesters have been occupying the entrance to the president’s office for more than two months to demand President Gotabaya Rajapaksa's resignation. They accuse him and his powerful family that included several siblings holding top government positions of plunging the country into the crisis through corruption and misrule.
Gas lines and scuffles: Sri Lanka faces humanitarian crisis
Chamila Nilanthi is tired of all the waiting. The 47-year-old mother of two spent three days lining up to get kerosene in the Sri Lankan town of Gampaha, northeast of the capital Colombo. Two weeks earlier, she spent three days in a queue for cooking gas -- but came home with none.
“I am totally fed up, exhausted,’’ she said. “I don’t know how long we have to do this.’’
A few years ago Sri Lanka’s economy was growing strongly enough to provide jobs and financial security for most. It's now in a state of collapse, dependent on aid from India and other countries as its leaders desperately try to negotiate a bailout with the International Monetary Fund.
What’s happening in this South Asian island nation of 22 million is worse than the usual financial crises seen in the developing world: It's a complete economic breakdown that has left ordinary people struggling to buy food, fuel and other necessities and has brought political unrest and violence.
Read:Senior US officials visit Sri Lanka to help resolve crisis
“It really is veering quickly into a humanitarian crisis,’’ said Scott Morris, a senior fellow at the Center for Global Development in Washington.
Such disasters are more commonly seen in poorer countries, in sub-Saharan Africa or in war-torn Afghanistan. In middle-income countries such as Sri Lanka they are rarer but not unheard of: 6 million Venezuelans have fled their oil-rich home country to escape a seemingly unending political crisis that has devastated the economy.
Indonesia, once touted as an “Asian Tiger’’ economy, endured Depression-level deprivation in the late 1990s that led to riots and political unrest and swept away a strong man who’d held power for three decades. The country now is a democracy and a member of the Group of 20 biggest industrial economies.
Sri Lanka’s crisis is largely the result of staggering economic mismanagement combined with fallout from the pandemic, which along with 2019 terrorism attacks devastated its important tourism industry. The COVID-19 crisis also disrupted the flow of payments home from Sri Lankans working abroad.
The government took on big debts and slashed taxes in 2019, depleting the treasury just as COVID-19 hit. Sri Lanka’s foreign exchange reserves plummeted, leaving it unable to pay for imports or defend its beleaguered currency, the rupee.
Ordinary Sri Lankans -- especially the poor -- are paying the price. They wait for days for cooking gas and petrol -- in lines that can extend more than 2 kilometers (1.2 miles). Sometimes, like Chamila Nilanthi, they go home with nothing.
Eleven people have died so far waiting for gasoline. The latest was a 63-year-old man found dead inside his vehicle on the outskirts of Colombo. Unable to get gasoline, some have given up driving and resorted to bicycles or public transportation to get around.
The government has closed urban schools and some universities and is giving civil servants every Friday off for three months, to conserve fuel and allow them time to grow their own fruit and vegetables.
Food price inflation is running at 57%, according to government data, and 70% of Sri Lankan households surveyed by UNICEF last month reported cutting back on food consumption. Many families rely on government rice handouts and donations from charities and generous individuals.
Unable to find cooking gas, many Sri Lankans are turning to kerosene stoves or cooking over open fires.
Read: Why Sri Lanka’s economy collapsed and what’s next
Affluent families can use electric induction ovens for cooking, unless the power is out. But most Sri Lankans can’t afford those stoves or higher electric bills.
Sri Lankans furious over fuel shortages have staged protests, blocked roads and confronted police. Fights have broken out when some try to jump ahead in fuel lines. Police have attacked unruly crowds.
One night last week, a soldier was seen assaulting a police officer at a fuel station in a dispute over gasoline distribution. The police officer was hospitalized. The police and military are separately investigating the incident.
The crisis is a crushing blow to Sri Lanka’s middle class, estimated to account for 15% to 20% of the country’s urban population. Until it all came apart, they enjoyed financial security and increasing standards of living.
Such a reversal is not unprecedented. In fact, it looks like what happened to Indonesia in the late 1990s.
The U.S. Agency for International Development -- which runs aid projects for poor countries -- was preparing to close up shop in the Indonesian capital Jakarta; the country didn’t seem to need the help. “As one of the Asian Tigers, it had worked its way off the aid list,’’ recalls Jackie Pomeroy, an economist who worked on a USAID project in the Indonesian government before joining the World Bank in Jakarta.
But then a financial crisis -- triggered when Thailand suddenly devalued its currency in July 1997 to combat speculators -- swept across East Asia. Plagued by widespread corruption and weak banks, Indonesia was hit especially hard. Its currency plummeted against the U.S. dollar, forcing Indonesian companies to cough up more rupiahs to pay back dollar-denominated loans.
Businesses closed. Unemployment soared. Desperate city dwellers returned to the countryside where they could grow their own food. The Indonesian economy shrank more than 13% in 1998, a Depression-level performance.
Desperation turned to rage, and demonstrations against the government of Suharto, who’d ruled Indonesia with an iron fist since 1968. “It very quickly rolled into scenes of political unrest,’’ Pomeroy said. “It became an issue of political transition and Suharto.’’ The dictator was forced out in May 1998, ending autocratic rule.
Although they live in a democracy, many Sri Lankans blame the politically dominant Rajapaksa family for the disaster. “It’s their fault, but we have to suffer for their mistakes,” said Ranjana Padmasiri, who works as a clerk at a private firm.
Two of the three top Rajapaksas have resigned — Prime Minister Mahinda Rajapaksa and Basil Rajapaksa, who was finance minister. Protestors have been demanding that President Gotabaya Rajapaksa also step down. They’ve camped outside his office in Colombo for more than two months.
Resignation, Padmasiri said, isn’t enough. “They can’t get away easily,’’ he said. “They must be held responsible for this crisis.’’
Senior US officials visit Sri Lanka to help resolve crisis
Senior U.S. officials arrived in Sri Lanka on Sunday to find ways to help the island nation in the throes of an unprecedented economic crisis and severe shortages of essential supplies, as the energy minister warned that new fuel shipments would be delayed.
The U.S. over the past two weeks has announced millions of dollars in assistance to Sri Lanka, which has been surviving on $4 billion in credit lines from neighboring India. It also has received pledges of $300 million to $600 million from the World Bank to buy medicine and other items.
Prime Minister Ranil Wickremesinghe last week announced the economy had “collapsed” due to dwindling foreign exchange reserves and a mounting debt, worsened by the pandemic and other longer term troubles.
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The U.S. delegation was led by Robert Kaproth, deputy assistant secretary of Treasury for Asia, and Kelly Keiderling, deputy assistant secretary of state for South and Central Asia.
During their four-day stay, they will meet a wide range of political representatives, economists, and international organizations to “explore the most effective ways for the U.S. to support Sri Lankans in need, Sri Lankans working to resolve the current economic crisis, and Sri Lankans planning for a sustainable and inclusive economy for the future,” the U.S. Embassy said in a statement.
“This visit underscores our ongoing commitment to the security and prosperity of the Sri Lankan people,” said Julie Chung, U.S. ambassador to Sri Lanka.
She said that as Sri Lankans endure some of the “greatest economic challenges in their history, our efforts to support economic growth and strengthen democratic institutions have never been more critical.”
The U.S. has announced $120 million in new financing for small and medium-sized businesses, a $27 million contribution to Sri Lanka’s dairy industry and $5.75 million in humanitarian assistance to help those hit hardest by the economic crisis. Another $6 million was committed in new grants for livelihoods and technical assistance on financial reform.
Sri Lanka says it’s unable to repay $7 billion in foreign debt due this year, pending the outcome of negotiations with the International Monetary Fund on a rescue package. It must pay $5 billion on average annually until 2026. Authorities have asked the IMF to lead a conference to unite Sri Lanka’s lenders.
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Power and Energy Minister Kanchana Wijesekera in a tweet on Saturday evening urged people not to line up for fuel, saying new shipments would be delayed due to “banking and logistics reasons.”
He said limited stocks of fuel will be distributed to limited stations throughout next week. He said until the next shipments arrive, “public transport, power generations and industries will be given a priority.”
Wickremesinghe said last week that the state-run Ceylon Petroleum Corporation was $700 million in debt and as a result, no country or organization was willing to provide fuel.
Protesters have occupied the entrance to President Gotabaya Rajapaksa’s office for more than two months demanding his resignation, saying the primary responsibility for the crisis rests with him and his family, whom they accuse of corruption and mismanagement.
Why Sri Lanka’s economy collapsed and what’s next
Sri Lanka’s prime minister says the island nation’s debt-laden economy has “collapsed” as it runs out of money to pay for food and fuel. Short of cash to pay for imports of such necessities and already defaulting on its debt, it is seeking help from neighboring India and China and from the International Monetary Fund.
Prime Minister Ranil Wickremesinghe, who took office in May, was emphasizing the monumental task he faces in turning around an economy he said is heading for “rock bottom.”
Sri Lankans are skipping meals as they endure shortages, lining up for hours to try to buy scarce fuel. It’s a harsh reality for a country whose economy had been growing quickly, with a growing and comfortable middle class, until the latest crisis deepened.
HOW SERIOUS IS THIS CRISIS?
Tropical Sri Lanka normally is not lacking for food but people are going hungry. The U.N. World Food Program says nearly nine of 10 families are skipping meals or otherwise skimping to stretch out their food, while 3 million are receiving emergency humanitarian aid.
Doctors have resorted to social media to try to get critical supplies of equipment and medicine. Growing numbers of Sri Lankans are seeking passports to go overseas in search of work. Government workers have been given an extra day off for three months to allow them time to grow their own food. In short, people are suffering and desperate for things to improve.
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WHY IS THE ECONOMY IN SUCH DIRE STRAITS?
Economists say the crisis stems from domestic factors such as years of mismanagement and corruption, but also from other troubles such as a growing $51 billion in debt, the impact of the pandemic and terror attacks on tourism, and other problems.
Much of the public’s ire has focused on President Gotabaya Rajapaksa and his brother, former Prime Minister Mahinda Rajapaksa. The latter resigned after weeks of anti-government protests that eventually turned violent.
Conditions have been deteriorating for the past several years. In 2019, Easter suicide bombings at churches and hotels killed more than 260 people. That devastated tourism, a key source of foreign exchange.
The government needed to boost its revenues as foreign debt for big infrastructure projects soared, but instead Rajapaksa pushed through the largest tax cuts in Sri Lankan history, which recently were reversed. Creditors downgraded Sri Lanka’s ratings, blocking it from borrowing more money as its foreign reserves sank. Then tourism flatlined again during the pandemic.
In April 2021, Rajapaksa suddenly banned imports of chemical fertilizers. The push for organic farming caught farmers by surprise and decimated staple rice crops, driving prices higher. To save on foreign exchange, imports of other items deemed to be luxuries also were banned. Meanwhile, the Ukraine war has pushed prices of food and oil higher. Inflation was near 40% and food prices were up nearly 60% in May.
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WHY DID THE PRIME MINISTER SAY THE ECONOMY HAS COLLAPSED?
Such a stark declaration might undermine any confidence in the state of the economy and it didn’t reflect any specific new development. Wickremesinghe appeared to be underscoring the challenge his government faces in turning things around as it seeks help from the IMF and confronts criticism over the lack of improvement since he took office weeks ago. He’s also fending off criticism from within the country. His comment might be intended to try to buy more time and support as he tries to get the economy back on track.
The Finance Ministry says Sri Lanka has only $25 million in usable foreign reserves. That has left it without the wherewithal to pay for imports, let alone repay billions in debt.
Meanwhile the Sri Lankan rupee has weakened in value by nearly 80% to about 360 to $1. That makes costs of imports even more prohibitive. Sri Lanka has suspended repayment of about $7 billion in foreign loans due this year out of $25 billion to be repaid by 2026.
WHAT IS THE GOVERNMENT DOING ABOUT IT?
Wickremesinghe has ample experience. This latest is his sixth term as prime minister.
So far, Sri Lanka has been muddling through, mainly supported by $4 billion in credit lines from neighboring India. An Indian delegation was in the capital Colombo on Thursday for talks on more assistance, but Wickremesinghe warned against expecting India to keep Sri Lanka afloat for long.
“Sri Lanka pins last hopes on IMF,” said Thursday’s headline in the Colombo Times newspaper. The government is in negotiations with the IMF on a bailout plan and Wickremesinghe said Wednesday he expects to have a preliminary agreement with the IMF by late July.
The government also is seeking more help from China. Other governments like the U.S., Japan and Australia have provided a few hundred million dollars in extra support.
Earlier this month, the United Nations began a worldwide public appeal for assistance. So far, projected funding barely scratches the surface of the $6 billion the country needs to stay afloat over the next six months.
To counter Sri Lanka’s fuel shortage, Wickremesinghe told The Associated Press in a recent interview that he would consider buying more steeply discounted oil from Russia to help tide the country through its crisis.