Here’s what you need to know. Experts say the crisis has been going on for years, driven by a bit of bad luck and a lot of government mismanagement. Over the past decade, the Sri Lankan government has borrowed huge sums of money from foreign lenders to finance public services, said Murtaza Jafferjee, president of the Colombo-based Advocata Institute think tank. This borrowing spree coincided with a series of hammer blows to the Sri Lankan economy, from natural disasters – such as powerful monsoons – to man-made disasters, including a government ban on chemical fertilizers that decimated farmers’ crops. These problems worsened in 2018, when the dismissal of the Prime Minister by the President sparked a constitutional crisis. the following year, when hundreds of people in churches and luxury hotels were killed in the Easter bombings of 2019. and from 2020 onwards with the advent of the Covid-19 pandemic. Faced with a huge deficit, President Gotabaya Rajapaksa cut taxes in a doomed effort to boost the economy. But the move failed, instead it hit government revenue. This has prompted rating agencies to downgrade Sri Lanka to near-default levels, meaning the country has lost access to foreign markets. Sri Lanka then had to return to its foreign exchange reserves to repay public debt, reducing its reserves from $ 6.9 billion in 2018 to $ 2.2 billion this year. This affected imports of fuel and other commodities, which pushed up prices. On top of that, the government in March channeled the Sri Lankan rupee – meaning its price was set on the basis of supply and demand in the foreign exchange markets. The move appeared to be aimed at devaluing the currency to qualify for a loan from the International Monetary Fund (IMF) and to encourage remittances. However, the fall of the rupee against the US dollar made things worse for ordinary Sri Lankans.
What does this mean for humans on the ground?
For the people of Sri Lanka, the crisis has turned their daily lives into an endless cycle of waiting in line for basic goods, many of which are on a voucher. In recent weeks, stores have been forced to close because refrigerators, air conditioners or fans can no longer operate. Soldiers are stationed at gas stations to calm customers, who line up for hours in the heat to fill their tanks. Some people have even died while waiting. A mother in the capital, Colombo, told CNN she was waiting for propane gas to be able to cook meals for her family. Others say the cost of bread has more than doubled, while car and taxi drivers say the portions of fuel are too meager to make a living. Some are caught in the middle of nowhere – they have to work to feed their families, but they also have to queue for supplies. A street sweeper with two young sons told CNN he was quietly leaving work to join the queues for food before returning in a hurry. Even members of the middle class with savings are frustrated, fearing that they might run out of basic necessities such as medicine or gas. And life is made more difficult by the frequent power outages that plunge Colombo into darkness, sometimes for more than 10 hours at a time.
What about the demonstrations?
Protesters in Colombo took to the streets in late March, demanding government action and accountability. Disappointment and public outrage erupted on March 31 when protesters threw bricks and lit fires outside the president’s private residence. The police used tear gas and water cannons to dissolve the demonstrations and then imposed a 36-hour traffic ban. President Rajapaksa declared a nationwide state of emergency on April 1, authorizing authorities to detain people without a warrant and blocking social media platforms. However, the protests continued the next day in defiance of the curfew, with police arresting hundreds of protesters. The demonstrations continued in the following days, although they remained largely peaceful. On Tuesday night, crowds of student protesters again surrounded Rajapaksa’s residence, demanding his resignation. The emergency decree was revoked on April 5.
What about the cabinet?
The entire cabinet of the government was effectively dissolved on April 3 due to mass resignations of top ministers. About 26 ministers resigned that weekend, including the president’s nephew, who criticized the apparent social media blackout as “something he would never approve of.” Other key figures, including the central bank governor, also resigned. Facing a government in chaos, the president on Monday attempted a reshuffle he hoped would appease the opposition. Four ministers, including a finance minister, have been appointed to temporarily head the government, while several others have taken up new posts in a bid to keep the country afloat “until a full cabinet is appointed,” according to a presidential press release. But just a day later, the caretaker finance minister resigned – explaining that he had taken the post only because of “many requests submitted” and that he realized that “new and precautionary and unconventional steps need to be taken”. And the reorganization failed to stop further downfalls. The ruling Sri Lankan Popular Front Coalition (also known as Sri Lanka Podujana Peramuna) lost 41 seats as of Tuesday, after members of various partner parties left to continue as independent groups. The coalition was left with only 104 seats, losing its majority in parliament.
What did the government say?
President Rajapaksa issued a statement on April 4, but did not directly address the resignations, urging only all parties to “work together for the good of all citizens and future generations.” “The current crisis is the result of a number of economic factors and global developments,” the statement said. “As one of the leading democracies in Asia, solutions to this must be found within a democratic framework.” Later in the day, announcing the cabinet reshuffle, the president’s office issued a statement saying that Rajapaksa “sought the support of all the people to overcome the economic challenge facing the country.” On April 6, Prime Minister Whip Johnston Fernando said during a parliamentary session that Rajapaksa would not resign “under any circumstances.” Fernando is a member of the ruling coalition and is considered a close ally of the President. Earlier, Rajapaksa had said he was trying to resolve the issue, saying in a speech to the nation last month that “this crisis was not created by me.” On April 1, Prime Minister Mahinda Rajapaksa – the president’s older brother and former president himself – told CNN that it was wrong to say the government had mismanaged the economy. On the contrary, Covid-19 was one of the causes, he said.
What happens next?
Sri Lanka is now seeking financial support from the IMF and is turning to regional powers that may be able to help. During his speech last month, President Rajapaksa said he had weighed the pros and cons of working with the IMF and decided to seek a bailout from the Washington-based institution – something his government was reluctant to do. . Sri Lanka has also asked for help from China and India, with New Delhi already issuing a $ 1 billion credit line in March – but some analysts have warned that such aid could prolong the crisis rather than resolve it. There is still great uncertainty about what will follow. National consumer price inflation has nearly tripled, from 6.2% in September to 17.5% in February, according to the country’s central bank. And Sri Lanka has to repay a debt of about $ 4 billion for the rest of this year, including a $ 1 billion international government bond maturing in July. And the situation has caused alarm from international observers. Speaking at a news conference on April 5, Liz Throssel, spokeswoman for the UN High Commissioner for Human Rights, expressed concern about Sri Lanka’s official response. The government’s ban on traffic, the blackout on social media and police crackdowns on protesters could prevent or discourage people from expressing their grievances, he said, adding that be used to stifle dissent or to prevent peaceful protest “. He said the United Nations was monitoring “closely” and warned of “a shift towards militarization and a weakening of institutional controls and balances in Sri Lanka”. CNN’s Julia Hollingsworth, Rukshana Rizwie and Iqbal Athas contributed to the report.
