What is Happening?
The paradise island country of Sri Lanka has no money, no food, no fuel, no medicines and there’s a shortage of everything and anything one could possibly imagine.
Sri Lanka currently is going through an economic crisis with high inflation, heaps of debt, a falling currency, and empty foreign reserves.
So what Sri Lanka is facing right now is basically everything that could go wrong with a country’s economy and what’s worse is that it was all avoidable but the Ruling Government was too ignorant to avoid it or rather handle the crisis.
Why is it Happening?
The government basically went bankrupt, it just couldn’t pay the world debt anymore.
More precisely, the corrupt government ran out of money, but there were a lot of reasons why this happened:
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Dud Projects That Didn’t Earn Money
The Rajapaksa government spent lavishly on infrastructure projects such as stadiums, port expansions, tourist buildings, etc.
One such flop project was the lotus tower, where the govt spent a whopping 400 million INR, only for the tower to be left unused and abandoned with no way for any sort of revenue generation.
Thus the government mindlessly started a lot of such projects that were spent on without budget limits that eventually did not provide the returns that could justify the investments on it.
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Tax Reliefs
It is kind of a normal thing to happen - when a political party makes promises before getting elected and fails to fulfill them after it has been elected but this isn’t always the case.
During the 2019 elections the Rajapaksa party promised that if elected, it would provide tax relief. When the Rajapaksa got elected, for some weird reason, unlike the traditional political behavior of forgetting their promises, they branched out and they actually did declare tax cuts which led to an immediate decrease in government revenue, meaning the government suddenly had to lose out on a lot of money which meant a sudden 25% dip in their revenue.
The bigger problem here was not losing out on a lot of money but rather losing out on it without a plan to make up for it at the least.
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It Bought More Than it Sold
The country imported way more than it exported which in market terms made the country’s currency value hit the ground which means in simpler terms it spent more than it earned and this led to a state of the country’s economic situation at a point where it couldn’t even afford basic necessities for its citizens to manufacture or get it imported from the foreign market.
So if you look at it from a general perspective, the crisis today in Sri Lanka could have been foreseen long back because the country followed ‘ a high spending and a high borrowing’ pattern for quite a while now, and this had already laid smooth roads for the crisis we see today.
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The Pandemic Did ‘Em Dirty
A major contributor to Sri Lanka’s GDP was Tourism with a contribution of 13%, and as soon as the pandemic hit the world this source of the country’s revenue generation completely got shut off for around two years, which sent the country into a Red zone financially.
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Banned Chemical Fertilisers
Yes, I know who could have thought taking a step towards environmental friendliness, would lead to a country full of starved citizens. After tourism, agriculture is the backbone of the Sri Lankan economy- approximately 70% of the population’s dependency is either directly or indirectly on agriculture.
And ever since the government put a ban on chemical fertilizers in April 2021, undoubtedly the crop failed and the yields took a huge hit, which caused a price hike leading to country-wide inflation. Not only was the yield less than usual, but the country also had to import rice due to its acute shortage.
Although the govt did lift the ban later in NOV 2021, these 8 months of the ban had already set the stage for a mass scarcity of food in the country. If you haven’t been living under the rock, you might have come across the news of Sri Lankan citizens standing in queues for long hours only to see empty shelves in the ration shops.
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A Saga of Accumulated Loan
The country was losing money every day, there was not much revenue generated due to tourism, food shortage was already a problem, neither were the local businesses contributing much to the economy nor was the corrupt government interested in the country’s daily being.
So basically it was barely earning but spending like a spoilt brat and this money came from the loan it took from foreign countries and other investors around the globe.
Eventually, this led to the country being defaulted on debts on the global front.
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A Failed Government
The biggest mistake that the govt did was not taking immediate corrective measures before it was too late.
If we analyze the situation, this crisis has been slowly bred for quite some time now - so logically this economic crisis could have been avoided only if the govt paid even slight attention to it with responsibility.
It seemed like the govt sucked every last drop of money out of the country it possibly could and then took a nap to the cries of its citizen’s miseries throughout the crises.
And this absence of immediate accountability and disaster recovery plan led to the situation getting even worse.
How is the Sri Lankan Government Dealing With It?
The Gottabaya government just couldn’t handle the situation, it brought the county to the edge of a cliff and froze there out of fear.
To be specific after the crisis, the government lacked immediate measures which worsened the crisis by folds, now the country is not only short on money but also on food, medicines, and fuel.
For the last few months, the country has been facing wild protests from the citizens demanding the removal of president Gottabaya Rajapaksa, but in spite of extreme opposition from the citizens, there hasn’t been any change in the government.
Although President Gottabaya has appointed a new Prime Minister Ranil Wikremesinghe (Former Prime Minister & opposition party member)- with an intent to run a unity govt that includes members from all political parties, to find a way out of this crisis.
Sri Lanka Currently needs at least 20 billion dollars to be able to import basic necessities like food, medicines, fuel, etc for its citizens. But the bigger question is where will this money come from when the whole world has seen the years of mismanagement of the country.
Conclusion
“In brief what Sri Lanka is facing was a political crisis that initiated an economic crisis which led to an overall country-wide crisis, affecting all and everyone in the country.”
A political mis-administration of the Rajapaksa government led to what is seen as an economic crisis, which when magnified is a true humanitarian crisis situation for the country’s citizens.