Overshadowed by other world news such as the war in Ukraine, Sri Lanka has been in a state of deep crisis. The proximate cause is the depletion of foreign currency reserves to below $1 billion which has resulted in the country being unable to pay for the imports of some of the most basic commodities like fuel for both vehicles and cooking, fertilizer, and essential foodstuffs such as milk and sugar. Surgeries have been suspended due to a shortage of medical supplies. As a result of the shortage of fuel, there have been daily power blackouts lasting up to 13 hours (except in the capital city Colombo because of course the wealthy who live in those areas must never be inconvenienced) and long lines of people waiting for hours and sometimes even overnight trying to purchase fuel and food and even then coming up empty.
The government tried to put a positive spin on the ban on the imports of fertilizer by saying that it would make Sri Lanka the first country to go 100% organic, but crop yields dropped dramatically, exacerbating the food shortages and leading to price rises. To compound the problem, the tourism industry, a big source of foreign currency, has slumped, first because of the pandemic and more recently because the first and third largest numbers of tourists were from Russia and Ukraine and the current war there has torpedoed that as well. The government also enacted a massive tax cut in December 2019 which has resulted in huge deficits that the government and Central Bank responded to by printing money that has led to a large inflationary spike.
This has led to widespread and spontaneous demonstrations against the government demanding that they resign, with a large crowd even gathering outside the president’s residence. In response, the government declared a state of emergency, imposed curfews, and sent heavily armed troops out on the streets to control the situation but with little effect, as people are defying the curfew orders to protest. From what I have heard from friends and family and news reports, even people who are normally not politically active are angry and out demonstrating. A friend of mine showed me a video of his elderly mother (over 90 years of age) and his siblings out in the streets holding placards urging the government to go.
This is a rapid fall in popularity for the president Gotabaya Rajapaksa and his party. Following the carnage created by terrorist bombings of three Catholic churches and three luxury hotels on Easter Sunday 2019, he was elected president in November of that year on a strong law-and-order platform. He had been defense minister earlier and was behind the brutal suppression by the military in 2009 of the separatist movement led by the Tamil Tigers. That military offensive was accompanied by massive killings and torture and displacement of refugees. His party also won a big majority in the parliamentary elections in August 2020, with close to 150 seats in the 225 member body. His brother Mahinda Rajapaksa, who had been president from 2005 to 2015, became prime minister.
But his popularity has plummeted because of the hardships that people are currently enduring. In response to the crisis, the entire cabinet has submitted its resignations, as has the governor of Central Bank, leaving just the president and prime minister in office. Sri Lanka has a strong executive presidential system with a weak parliament and few checks and balances on executive power. The president has invited the opposition parties to join in a national unity government but they have declined, likely suspecting that the president is trying to get them to share the blame for problems that he either largely created or failed to manage.
The problems that Sri Lanka faces are deep and long-standing and stem from a political culture of nepotism and corruption. Sri Lanka could serve as the poster child for nepotism, especially with the Rajapaksa family that currently dominates the government. The current president’s older brother is the prime minister, having previously served two terms as president. The president’s younger brother is the finance minister, his oldest brother is the minister of agriculture, and his nephew (the prime minister’s son) is also a cabinet minister. The Rajapaksa family reportedly has been siphoning a lot of public money into their private coffers, and it was recently revealed in the Pandora Papers how the president’s cousin (who also used to be a deputy minister) and her husband have purchased luxury apartments in London and Sydney.
The size of the outstanding foreign currency loans for the country is officially estimated to be $35 billion as of a year ago. Since it looks like the government may not meet its loan payments and could default, the country’s credit rating has slumped, making it hard to get new loans in the open market. The country is seeking short term credit from China, India, and the IMF to tide over the crisis.
But the long term problems are deep. Once a culture of corruption has become embedded, it s hard to break free. Furthermore, there has been a long-term trend of undermining the independence of institutions such as the judiciary and the Central Bank, weakening the parliament and the judiciary, and strengthening the power of the presidency, all of which enable corruption and cronyism. Restoring trust in those institutions is going to be difficult, since it requires government leaders to cede power and stop using the government as a means of increasing their personal wealth, things that they have become used to seeing as the perks of office.
As if all this was not bad enough, it appears that the Rajapaksas and political leaders, like those before them, are enamored of soothsayers and astrologers and go to them for advice and counsel and base decisions on what they hear. The current seer in vogue is someone known as Gnana Akka who has reportedly got a hot line to the Goddess Kali. She has reportedly also become very wealthy by using her powerful contacts. The fact that Rajapaksa has created such such a mess should not give people much confidence in either Gnana Akka or Kali’s acumen and there have been demonstrations against her for the mess but the government has provided her with police protection.
The only bright spot in this very bleak picture is that although the country has gone through many major crises in the 74 years since independence in 1948 that included two attempted overthrows of the government and a brutal civil war that saw hundreds of thousands of people being killed and displaced and human rights violations on a massive scale, the country has avoided military coups and stayed democratic, at least as far as having relatively fair elections goes, though other democratic institutions have been seriously undermined. The present crisis may prove to be the most severe test as to whether that record will continue.
Sri Lanka is an example of the power of the formula:
corruption + nepotism + superstition + incompetence = guaranteed mess
The chickens have come home to roost and as always, it is the ordinary people who are paying the price.
I’d assumed the Rajapaksas were Sinhalese Buddhists, so that seems odd.
The proximate cause is the depletion of foreign currency reserves to below $1 billion
How did that happen?
Rob @#1,
I did not want to get into the weeds of religious distinctions but here is a short response.
Yes, the Rajapaksas are Sinhala Buddhists. But this kind of syncretism is not uncommon in SL and there is a long history of some SBs adopting some aspects of Hinduism into their daily practices. ‘Pure’ Buddhist philosophy has no gods and thus does not satisfy the need that some Buddhists have to believe in a powerful deity who can see the future and answer their prayers and thus provide hope in times of trouble. Even some Buddhist monks indulge in, and even encourage, this kind of magical thinking since it provides them with an aura of power. This leads to a travesty of Buddhism, including things like people worshipping images of the Buddha, that infuriates some academic Buddhist philosophers.
For example, when you travel by bus, the driver will often have pictures of the Buddha and a Hindu deity (and sometimes even Jesus) plastered on the windshield. Covering their bets as it were. And the biggest destination for local pilgrimages, a town called Kataragama, has shrines for Buddhists and Hindus and both groups worship at the biggest shrine for the god Kataragama.
Marcus @#2,
I am not an economist, not have I studied the issue in great depth, but here is a summary of what I have gleaned from various sources and over a long time, because this issues go all the way back to when I was a student there.
It has long been the case that SL governments have lived beyond their means and depended upon relatively soft loans from agencies like the IMF and World Bank to cover their deficits. As long as enough money was coming in to meet the loan repayment schedules, they did not seem to care about the fact that they were running deficits. This enabled governments to indulge in grandiose schemes and corruption rather than plowing the money into development programs that could provide meaningful returns.. But as these loans got harder to get, governments also borrowed from the open market and this came with higher interest rates and more stringent conditions.
The pandemic has hit the country hard in two ways. One is that tourism, a major source of foreign currency, has cratered. Another is that a lot of poor Sri Lankans took service jobs in the Middle East and were sending remittances home. Now that has also declined.
Mano @3: Thanks for the explanation. Humans are always more complicated than one thinks.
advice not advise, pardon my nitpicking
[Corrected. Thanks! -- Mano]
No need to be an economist. Actually being one is an impediment to understand the situation.
One of my nephews will expect a pay raise for the next year and he will borrow that money and blow it this year. Most governments do that expecting the economy will keep on be growing. Unfortunately, they have not heard about the phenomenal book ‘The Limits to Growth’ published fifty years ago.
Sri Lanka being an island is the first one to fall. Others including the US will follow.
Only solution in this finite world is reduced consumption and de-growth. Wether people like it or not, it will be imposed on them.
Please watch this. A good explanation of how the crisis developed. Pakistan is in a similar mess.
What has made me most upset about Sri Lanka is there has never been a reckoning about the serious human rights violations since the 1980s culminating in the massacre at the end of the civil war 13 years ago.
The economic mismanagement is just another aspect of a political culture without accountability.
It seems the whole rotten political hierarchy needs to collapse before there are consequences for crimes done by the state and its leaders.
I understood (although perhaps this is a westerner’s misunderstanding) that Kali is the goddess of destruction. If that’s where the ruling elite are getting their advice…
More seriously, I feel for the Sri Lankan people. But I can’t wholly acquit them of blame for their own plight. If you vote for a “strongman”, you can expect them to undermine any checks on their power, and to use it to enrich themselves and their relatives.
KG:
A sentiment which relies on Sri Lanka being a functioning democracy.]
(A sentiment which could be extended to a great many societies)