CRISES AND ECONOMY OF SRILANKA

(Ali, Karachi)

protesting

The challenges that Sri Lanka face, ranging from a lack of food, fuel, and medicine to long daily power cuts and exam cancellations due to a lack of ink and paper, are numerous.

Sri Lanka is battling a huge lack of basic necessities brought on by an unprecedented economic crisis.
Foreign debt mountains, skyrocketing inflation, depleted foreign currency reserves, and devalued currency reserves
Sri Lanka is a living, breathing instance of everything that can go wrong with a country's economy, and the current administration has no way of salvaging the situation....
Sri Lanka is suffering its biggest economic crisis since gaining independence in 1948...
The cost of basic necessities such as food, fuel, and medicines has risen dramatically
A kilogram of rice costs 500 Sri Lankan rupees and sugar 290 rupees. When converted, this is approximately Rs 126 And 73 in PKR
Citizens have to stand in Queues for hours even to get essential commodities.troops are deployed
at state-run fuel stations to help in Distribution the people have to endure daily power cuts of more than seven hours in scorching heat
Sri Lanka is in the grip of an unprecedented economic turmoil. The crisis is caused in part by a lack of foreign currency, which has meant that the country cannot afford to pay for imports of staple foods and fuel, leading to acute shortages and very high prices
the crisis has been years in the making, driven by a little bad luck and a lot of government mismanagement.
Over the past decade, the Sri Lankan government has borrowed vast sums of money from foreign lenders to fund public services, said Murtaza Jafferjee, chair of Colombo-based think tank Advocata Institute.
This borrowing spree has coincided with a series of hammer blows to the Sri Lankan economy, from both natural disasters -- such as heavy monsoons -- to man-made catastrophes, including a government ban on chemical fertilizers that decimated farmers' harvests.
These problems were compounded in 2018, when the President's dismissal of the Prime Minister sparked a constitutional crisis; the following year, when hundreds of people at churches and luxury hotels were killed in the 2019 Easter bombings; and from 2020 onwards with the arrival of the Covid-19 pandemic.Facing a massive deficit, President Gotabaya Rajapaksa slashed taxes in a doomed attempt to stimulate the economy.
But the move backfired, instead hitting government revenue. That prompted rating agencies to downgrade Sri Lanka to near default levels, meaning the country lost access to overseas markets.
Sri Lanka then had to fall back on its foreign exchange reserves to pay off government debt, shrinking its reserves from $6.9 billion in 2018 to $2.2 billion this year. This impacted imports of fuel and other essentials, which sent prices soaring.
Topping all that, the government in March floated the Sri Lankan rupee -- meaning its price was determined based on the demand and supply of foreign exchange markets.
That move appeared aimed at devaluing the currency to qualify for a loan from the International Monetary Fund (IMF) and encourage remittances.
However, the plunging of the rupee against the US dollar only made things worse for ordinary Sri Lankans.
Protesters in Colombo took to the streets in late March, demanding government action and accountability. Public frustration and anger erupted on March 31, when demonstrators hurled bricks and started fires outside the President's private residence.
Police used tear gas and water cannons to break up the protests, and imposed a 36-hour curfew afterward. President Rajapaksa declared a nationwide public emergency on April 1, giving authorities powers to detain people without a warrant, and blocked social media platforms.
But protests went ahead the next day in defiance of the curfew, prompting police to arrest hundreds of demonstrators.
Protests have continued in the days since, though they remained largely peaceful. On Tuesday night, crowds of student protesters surrounded Rajapaksa's residence again, calling for his resignation.
The emergency ordinance was revoked on April 5.
The government's entire cabinet was effectively dissolved on April 3 due to mass resignations by top ministers.
Some 26 cabinet ministers stepped down that weekend, including the President's nephew, who criticized the apparent social media blackout as something he would "never condone." Other major figures including the governor of the central bank also resigned.And the reshuffle failed to stop further desertions. The ruling Sri Lanka People's Front Coalition (also known as the Sri Lanka Podujana Peramuna) lost 41 seats by Tuesday after members from several partner parties pulled out to continue as independent groups. The coalition was left with only 104 seats, losing its majority in parliament.
Sri Lanka is now seeking financial support from the IMF and turning to regional powers that may be able to help.
During last month's address, President Rajapaksa said he had weighed the pros and cons of working with the IMF and had decided to pursue a bailout from the Washington-based institution -- something his government had been reluctant to do.
Sri Lanka has also requested help from China and India, with New Delhi already issuing a credit line of $1 billion in March -- but some analysts warned that this assistance might prolong the crisis rather than solve it.
There is still much uncertainty around what comes next; national consumer price inflation has almost tripled, from 6.2% in September to 17.5% in February, according to the country's central bank. And Sri Lanka has to repay about $4 billion in debt over the rest of this year, including a $1 billion international sovereign bond that matures in July.
And the situation has prompted alarm from international observersThe government's curfew, social media blackout, and police action in breaking up the protests could prevent or discourage people from expressing their grievances, she said, adding that these measures "should not be used to stifle dissent or hinder peaceful protest." She said the UN was watching "closely," and warned against "the drift to militarization and the weakening of institutional checks and balances in Sri Lanka."

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