Sri Lanka on the brink of financial collapse as thousands protest fuel and food shortages

A nation on Australia’s doorstep is on the brink of financial collapse amid food and fuel shortages as it grapples with its worst crisis ever.

Sri Lanka is on the brink of financial collapse and the president is facing rapidly escalating protests demanding his resignation as the island nation grapples with its worst crisis in memory.

Food and fuel shortages, along with record inflation and regular power outages, have inflicted unprecedented misery on Sri Lankans in the most painful recession since independence from Britain in 1948.

Rating agencies have warned of a potential default on the country’s $51 billion foreign debt as authorities are unable to secure more commercial loans due to credit downgrades.

Many experts are blaming President Gotabaya Rajapaksa, who has been blamed for causing the crisis through a series of disastrous economic decisions since he came to power in 2019.

Public anger is at a fever pitch, with mobs attempting to storm the homes of several government figures and demanding Rajapaksa’s resignation.

‘I have to go back home’

Thousands of people from all walks of life have taken to the streets chanting anti-government slogans in recent weeks, with the rallying cry “Gota go home” a reference to Rajapaksa’s dual US citizenship.

Chanda Upul, 50, a resident of Colombo, said The Guardian at a protest in Colombo on Saturday that soaring petrol prices meant he was no longer able to pay reimbursements for his hired rickshaw and had lost his only source of income.

He said he and his four children are now surviving on rice and water.

“The only thing we can do now is drink poison, we’re finished,” he said. “I voted for Gota thinking he was a lion, now I can see he is worse than a dog. I love my country but I don’t know if it will remain a country for my children.

Nelum Leanage, 69, told the publication that she wanted Rajapaksa ‘to return all the money he stole from us and then resign from politics and leave this country’.

“He has no place here, yet he has stolen billions from us, he has a life of luxury when we have nothing,” she said. “Unlike him, with his American passport, we have no other country to go to.”

Poor economic management

A critical shortage of foreign currency has left Sri Lanka struggling to import essential goods as the pandemic torpedoes vital income from tourism and remittances.

Economists say the crisis has been exacerbated by government mismanagement, years of piled up borrowing and misguided tax cuts.

Rajapaksa slashed taxes when he took power, reducing the amount of income available to buy foreign currency, running up huge debts on what critics say were wasteful infrastructure projects, while printing large sums of money. money, increasing inflation and depleting the country’s foreign exchange reserves. .

At the end of 2019, Sri Lanka had $7.6 billion in foreign exchange reserves, but in March 2020 it had only $2.3 billion, the BBC remarks.

As the problem worsened in 2021, the government banned imports of chemical fertilizers in an attempt to stop the outflow of foreign currency.

Farmers were advised to use organic fertilizers instead, which led to many crop failures.

Sri Lanka now has to import even more food from abroad, further depleting its foreign currency.

Protests escalate

Local media reported that the protests were intensifying, with officials and school children joining protests organized largely through social media.

In an apparent attempt to head off further protests, the government on Thursday declared additional public holidays for next week to coincide with the traditional Sinhalese and Tamil New Year.

Security forces dispersed some protests with tear gas, water cannons and rubber bullets, and dozens of people were arrested, with many claiming to have been tortured in police custody.

Rajapaksa, who led the military in the final years of the civil war, ordered an unprecedented shutdown of social media and imposed a curfew as protests grew, but withdrew the measures after failing to stop people to get off the street.

Opposition parties rejected an overture by the president to form a unity administration and joined calls for him to step down.

But Chief Government Whip Johnston Fernando reiterated on Thursday that Rajapaksa would remain in office to lead the country out of the crisis.

Rajapaksa attended parliament on Thursday but did not address the chamber, where he lost his majority.

So far, there has been no clear signal that opposition lawmakers will attempt a no-confidence motion to overthrow the administration.

Debt restructuring

Rajapaksa’s office said late Wednesday that it had appointed a group of experts to organize a restructuring of external debt as it sought a way out of a deepening economic crisis, the three-party advisory group members tasked with guiding Sri Lanka through a “sustainable and inclusive reorganization”. recovery”.

Sri Lanka needs to raise $7 billion this year alone to pay off its debts.

Rajapaksa’s government is preparing for bailout talks with the International Monetary Fund, and finance ministry officials told AFP the trio would prepare a program for sovereign bondholders and other creditors to take a hair cut.

“What Sri Lanka is keen to do is avoid a default,” a ministry source told AFP, who requested anonymity.

“It will be a negotiated debt restructuring with the help of the IMF.”

The president has appointed Nandalal Weerasinghe, a retired pro-IMF central banker, as the new governor.

starvation warning

Speaker of Parliament Mahinda Yapa Abeywardana warned on Wednesday that the economic crisis could lead to famine if not resolved within a week.

“We are told this is the worst crisis, but I think this is just the beginning,” Abeywardana said at the start of a two-day debate on worsening economic hardship.

“Shortages of food, gas and electricity will worsen. There will be very acute food shortages and famine.

The parliamentary session was twice interrupted when opposition lawmakers shouted slogans denouncing members of the powerful Rajapaksa ruling family and demanding their resignation.

Meetings with the IMF are due to start next week, but Finance Minister Basil Rajapaksa – the president’s brother – resigned on Sunday evening along with almost the entire cabinet.

The country still does not have a replacement, his successor having resigned after just one day in power.

A Colombo court on Thursday imposed a travel ban on the country’s recently resigned central bank chief, alleging he was responsible for the country’s predicament by failing to seek IMF assistance sooner.

Ajith Cabraal, who resigned on Monday, was asked to appear in court on April 18 to respond to allegations of criminal breach of trust.

Rights activist Keerthi Tennakoon has filed a petition with the court alleging that the current shortages are due to Cabraal’s mismanagement of Sri Lanka’s foreign exchange reserves.

Court proceedings were briefly suspended when the power went out.

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