Decoding the Lankan crisis


Sri Lanka has become a classic example of a country that invited the economic crisis to its doors. Corrupt and ambitious practices of the ex-President Gotabaya Rajpaksa and his clan, wrong policies at the wrong time, mismanaged economic priorities and policies, and letting China get into the system finally proved fatal for Sri Lanka. The nature and global situations also not supported the country known for its beautiful destinations. First Covid-19 and then the Ukraine–Russia crisis posed further challenges to it.

While teaching the strategies of ‘String of Pearls’ and ‘Debt Diplomacy’ used by China, I always give example of Sri Lanka being a target that never realised or never bothered the end results of getting into the hands of China. Not only it has paid a huge strategic price by losing control over Hambantota port, it is also standing on the brink of complete systemic failure today because of the heavy loans that it took from China.

The anguish of the people is not political. The outrage of the people that we have seen on television sets has valid reasons. First, the crowd reached the residence of the ex-President to show the criticality of the situation. The President, instead of facing his people, fled the place immediately. He probably knew the dissent spread across the nation for his government. Because of a severe scarcity of foreign currency, the Gotabaya government could not pay for the essential imports like fuel. After facing the worst economic crisis in the country, the government cut the electric supply for many hours. A critical food and energy crisis had also hit the country. People were already facing the issues related to very high inflation.

This all did not happen overnight or in a day, or a month, or for that matter for a year. Since the end of the civil war in 2009, Sri Lanka made a strategic mistake by paying more focus on its internal market instead of international market for selling its produces. Since then, its imports started increasing more than the exports. This eventually led to less income incurring from the exports. Slowly, the country started moving towards a situation of scarcity in terms of its foreign earnings and money. The Gotabaya government, instead of working on this serious issue, made some fatal mistakes. Gotabaya, along with his brother, the Prime Minister of Sri Lanka, banned the imports of chemical fertilisers. Replacing this with organic fertilisers impacted the crop production in the country, leading to huge economic losses. Gotabaya also went ahead and introduced tax cuts, which further worsened the situation.

Slowly, this all made Sri Lanka a twin deficits economy. It was mentioned in various reports as well that how Sri Lankan economy faced the crisis due to its national expenditure surpassing its national income. It gradually reached the point where its foreign debts reached too high, while the income from the exports or foreign trade reached too low to survive any crisis.

If this was not enough, Covid-19 badly impacted the tourism industry, the dominant sector that helped run its national economy by earning foreign currency. The government still had the opportunity to fix the loopholes and come up with a crisis plan; however, nothing was seen to revive the economic situation. This led to very high inflation while, on the other hand, the demand and supply ratio also observed a huge jolt. Shortages of essential supplies like food and fuel left the government in no other choice but to halt the sales to the people. Long power cuts and collapsed healthcare system added to the crisis and finally people decided to hit the streets to register their anguish. Although they reached and protested at the residence of Gotabaya, one should also note that they did not become violent or, for that matter, started any violence in the country. This shows their trust in their Constitution and the law.

Another series of events started from here. First, Gotabaya fled with the help of Sri Lankan security forces. Many experts raised questions on the Sri Lankan forces; however, this should not be forgotten that he left the country in the capacity of the President of Sri Lanka, providing him immunity against any detainment. After he fled from Sri Lanka, people now reached the residence of the Prime Minister of Sri Lanka, as they had no faith remained in him as well.

As per the Constitution of Sri Lanka, the Prime Minister gets the charge of acting President by the Parliament in case the seat of the President becomes vacant. The Constitution gives the right to the Speaker of the Parliament to select the next president within a month’s time of the resignation given by the President. Although the emergency was imposed by the Prime Minister of Sri Lanka, asserting the powers as the acting President, it was still unclear that who gave him the charge as there was no clarity over the resignation of Gotabaya. The leader of the opposition also came up with some statements questioning the authority of the Prime Minister as the acting President. Then, after hours of confusion, the Speaker made it clear that Gotabaya had appointed Ranil Wickremesinghe as the acting President, while his resignation was still not made public.

The situation now seems to be bit clear. Gotabaya has fled from Sri Lanka, while the Prime Minister of Sri Lanka has been made the acting President, and the Parliament would be electing the new President by the end of this month.

India has played a commendable role during this whole crisis. It helped the Sri Lankan people with the supplies of food and medicines immediately after unrest broke in the country. So far, India has provided help worth over US$ 3.8 billion to Sri Lanka. However, the government of India made it very clear that it has no intention of interfering in the politics of Sri Lanka. The government of India also come up with the statements to clarify the rumours over its role in providing any passage or help to Gotabaya’s exit from the country. It is playing a constructive and neutral role so far as a good neighbour.

Sri Lanka needs to work on a two-pronged approach to look into the immediate fixes while deciding the road map for the future. It all depends on the political parties to come together and prioritise the immediate objectives for the country. Political stability and dynamic economic plan seem to the need of the hour. How and when Sri Lanka achieves the same remains a big question.

The author is a professor with the School of International Studies, JNU.

This all did not happen overnight or in a day, or a month, or for that matter for a year. Since the end of the civil war in 2009, Sri Lanka made a strategic mistake by paying more focus on its internal market instead of international market for selling its produces. Since then, its imports started increasing more than the exports.