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“Sunk.” A “serious situation.” And potentially, a “fall to the bottom.”
These are some of the ways the Sri Lankan prime minister on Wednesday described his country’s faltering economy as the island nation faces an extreme shortage of food and fuel.
According to experts, comments in Parliament by Prime Minister Ranil Wickremesinghe come after weeks of unrest caused by government incompetence, a dynamic exacerbated by global inflation and the supply chain disorder amid the Russian invasion of Ukraine and the persistent impacts of the coronavirus pandemic.
Sri Lanka closes, families struggle to eat as the crisis worsens
“We are now facing a much more serious situation beyond the mere shortage of fuel, gas, electricity and food,” Wickremesinghe said, speaking in Sinhalese. “Our economy has faced a complete collapse.”
Sri Lanka, a country of 23 million people on the south-east coast of India, has essentially had the fuel supply door closed in its face as its national company Ceylon Petroleum Corp. has a debt of $ 700 million.
“No country or organization in the world is willing to provide us with fuel,” the prime minister said. “They are even reluctant to provide fuel for cash.”
Economic chaos follows an explosion of political unrest: protests sparked by the generation of economic uncertainty and anger over corruption among the ruling Rajapaksa family forced Gotabaya Rajapaksa, the president, to remove his brother, Mahinda Rajapaksa, from the prime minister’s office last month. Wickremesinghe was appointed shortly afterwards.
Within the collapse of the Rajapaksa dynasty in Sri Lanka
While Wickremesinghe’s proclamation was dramatic, it was not necessarily exaggerated. “The economy is definitely on the verge of collapse,” said Nirvikar Singh, a professor of economics and expert on South Asia at the University of California at Santa Cruz. The government has been “surprisingly irresponsible and incompetent,” after mismanaging the country’s monetary, fiscal and economic policies since 2019, he said.
In recent days, gas lines have been lengthened for miles. On Monday, schools and government offices in major cities were closed for at least a week with fuel shortages forcing the country to stop.
Food insecurity has also affected Sri Lanka, with data from the country’s central bank showing a sharp rise in the prices of all food. Rice, a staple in the country, costs almost three times as much as a year ago. Prices of essential products such as tomatoes have quadrupled compared to the previous year. Last week, government workers were asked to grow their food in their backyards.
Schools and government offices in major Sri Lankan cities were closed on June 19 for at least a week due to severe fuel shortages. (Video: Reuters)
Signs of the devastating crisis are everywhere, including drug shortages in hospitals and businesses on the verge of closure. At the capital’s main public hospital, Colombo, essential supplies such as medicines and catheters are scarce.
“We are trying to manage ourselves in some way, but there is a shortage,” hospital spokeswoman Pushpa De Soysa said. “We just have to be careful when using what we have.”
In the nearby bustling Colpetty neighborhood, restaurant owner Pradeep Vithanachchi has turned to the black market for cooking gas, which is hard to find and expensive when available sporadically.
“It’s now an existential crisis for both the company and us,” he said of the restaurant, a facility there for four decades that he inherited from his father.
Sri Lanka is awaiting a loan from the International Monetary Fund, which Wickremesing said would not only provide tangible aid, but would also act as a “seal of approval” for “the world to trust us again. “, allowing the country to receive low-interest loans from other nations.
Economists say contraction in growth is a matter of great concern. Ahilan Kadirgamar, an economist at the country’s Jaffna University, said the economy would likely shrink by 10 percent. “People have given up on production and there is no planning or process to address it,” he said, adding that the country would need at least five years to find a solid foundation again.
Singh said international financial aid “should be able to change things relatively quickly, although there will be painful consequences”. He noted that Sri Lanka is a relatively small economy, meaning that the finances needed to pull the island out of its economic implosion “are not large on a global scale”.
If Sri Lanka emerges from the chaos, the experience will offer an advantage, Singh said, as economic concerns swirl around the world.
“Sri Lanka offers a lesson to other countries on the basics of economic management,” he said. “These lessons are not new, but sometimes they are forgotten.”
Masih reported from New Delhi and Farisz from Colombo.