Shirani Senanayake tries to send money to the United States for the education of her only daughter, who is studying for a master’s degree in economics in New York. Her daughter needs the money immediately for the current academic term, but Senanayake was unable to send the US $ 3,000 from her bank to Colombo. The bank put her on a waiting list because there is a long queue. The exasperated mother says she has no choice but to try informal avenues to send money so that her daughter’s education is not interrupted in a faraway land.
Almost all banks in Sri Lanka face a severe currency shortage as the government has put a cap on the money that can be sent overseas. Every day, hundreds of people visit banks in the hope of obtaining US dollars for emergency needs.
The third wave of Covid-19 and the subsequent lockdowns have put the island nation in a precarious situation. Its foreign exchange reserves are being depleted at an alarming rate and cash inflows are a trickle compared to cash outflows.
The government led by Gotabaya Rajapaksa has introduced a food emergency to contain soaring inflation. The government has imposed severe restrictions on the importation of non-essential items such as motor vehicles, expensive tires, floor tiles, furniture, gadgets, some building materials, among others. This has hit businesses that are already in shambles hard.
Sri Lanka has a dubious distinction. According to the World Bank, it is the only country in the upper middle income group in all of South Asia. It has a 100 percent literacy rate and tops human development indexes in other areas. The future looked bright for Sri Lankans in January 2020. Covid-19 hit the world a month later and the lives of the country’s population changed overnight.
Although the country handled the first wave of Covid-19 well, the second and third waves weighed heavily on the country’s economy and social life. The delta variant has ravaged the country, the latest casualty being former Minister of Foreign Affairs and Finance Mangala Samaraweera.
With a modest population of 22 million, Sri Lanka is heavily dependent on imports. Most food and other basic necessities are imported from neighboring countries, including India. There are not many manufacturing industries, and in this area too, there is a maximum of imports.
Sri Lanka is considered one of the top 10 tourist destinations in the world and attracts over 2 million tourists per year. Although the tourism sector’s contribution to gross domestic product is 5 percent, it employs over 30 lakhs and generates over $ 4 billion in revenue every year. The whole sector is however almost dead and the tour operators wait for a miracle to help them.
âIf the same situation continues for another six months, more than 50% of the tourism industry will shut down, leaving millions unemployed. It is a frightening scenario. It is a cash industry. The flow of money has completely stopped, âsaid the owner of a prominent Colombo hotel.
Sri Lanka exports tea, cinnamon, spices, seafood, gems and clothing to the West, earning more than US $ 6 billion in foreign currency each year. The Covid-19 lockdown and weak consumer sentiment around the world have resulted in low demand for these products. Export and import activities have been severely affected.
The Sri Lankan diaspora is another main source of income for the island nation, which sends home nearly US $ 1.5 billion annually. The global pandemic has even had an impact on remittances, and experts estimate there has been a drop of at least 25% this year. To overcome the crisis facing the country, the Central Bank of Sri Lanka (CBSL) has entered into a currency swap and line of credit with India, China and Bangladesh.
The food emergency imposed to contain inflation led to hoarding and the black market, further aggravating the situation.
âWe are in the solar sector. We import panels from China and other countries. We cannot send money to foreign banks because of the currency crisis. Our business took a big hit. We are now exploring the options for sending money from foreign accounts. It’s really a chaotic situation here, âsaid a business partner.
The CBSL has authorized the respective banks to manage foreign currencies, and the exchange rate varies from bank to bank. The US dollar was selling for 230 Sri Lankan rupees on Friday, while the Indian rupee was selling for 3 Sri Lankan rupees.
âThe CBSL seems to have abandoned its primary responsibilities. Banks now operate like private finance companies. It’s really shocking, âsaid an export and import businessman.
Despite the daily hardships, Sri Lankans still manage to smile and hope this is a temporary setback for the country. âWe are a resilient society. We have seen much worse in the past. In the 1970s we had a severe food crisis, a violent movement led by the Marxist JVP, 30 years of brutal civil war that killed over a lakh of people, the devastating 2004 tsunami and the recent Easter bombings. . We came out much stronger after each crisis. I hope for a speedy recovery. We will surely bounce back soon, âsaid Chandana Amaradasa, expert in the tourism sector.
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