What’s happening in Sri Lanka? | Start Here

Summary

Sri Lanka is facing a dire economic crisis, with shortages of essentials like food, fuel, and medicine, and a currency in free fall. This crisis is largely blamed on the Rajapaksa family, which has dominated the country’s politics for nearly 20 years. Years of mismanagement, corruption, and reckless spending led to the country defaulting on its debts. President Gotabaya Rajapaksa's decisions, including drastic tax cuts and a forced transition to organic farming, worsened the situation. Despite calls for his resignation, the government struggles to restore stability, and Sri Lanka seeks aid from the IMF and foreign nations to survive.

Takeaways

• 😀 Sri Lanka is facing a severe economic and political crisis, with shortages of food, fuel, and medicine, and a collapsed currency.
• 😀 The Rajapaksa family, in power for nearly 20 years, is blamed for much of the current turmoil due to corruption, nepotism, and poor governance.
• 😀 Mahinda Rajapaksa, who served as president for two terms, filled the government with family members, creating a dynastic rule.
• 😀 Gotabaya Rajapaksa, elected president in 2019, continued the trend, appointing more family members to key positions, consolidating power within the family.
• 😀 Sri Lanka’s economy was mismanaged with reckless spending on infrastructure projects, many of which, like the Lotus Tower, failed to deliver returns.
• 😀 Sri Lanka’s debt crisis worsened when the government defaulted on $7 billion of debt in April 2022, signaling the country’s inability to meet its financial obligations.
• 😀 The government’s decision to drastically cut taxes led to a 25% loss in revenue, exacerbating the financial crisis and deepening the economic problems.
• 😀 The forced switch to organic farming, banning chemical fertilizers, caused severe agricultural losses and food shortages, further driving up prices.
• 😀 The COVID-19 pandemic and its impact on tourism, a major source of foreign currency, contributed to the financial crisis and economic decline.
• 😀 Protests erupted across Sri Lanka, with violent clashes between anti-government protesters and government supporters, leading to casualties and the resignation of the prime minister.
• 😀 Sri Lanka is seeking international aid, with India and China offering loans, while hopes of a bailout from the IMF remain a crucial but complex path to recovery.

Q & A

What is the main cause of Sri Lanka's economic crisis?

The main cause of Sri Lanka's economic crisis is a combination of mismanagement by the Rajapaksa family, high levels of corruption, excessive government spending, unsustainable debt, and poor economic decisions such as drastic tax cuts and the push for 100% organic farming.

Why do many Sri Lankans blame the Rajapaksa family for the crisis?

Many Sri Lankans blame the Rajapaksa family because of their prolonged political control, corruption, nepotism, and poor decision-making. The family placed many relatives in key government positions and led policies that worsened the country's financial situation.

How did the Rajapaksa family's policies contribute to Sri Lanka's debt crisis?

The Rajapaksa family engaged in large-scale borrowing to fund infrastructure projects without generating enough returns. The government's spending exceeded its revenue, and Sri Lanka's imports surpassed its exports, leading to unsustainable debt and the inability to repay loans.

What was the impact of Gotabaya Rajapaksa's tax cuts on Sri Lanka's economy?

Gotabaya Rajapaksa's tax cuts resulted in a significant reduction in government revenue, amounting to about 25% less income for the government. This worsened the financial situation as the government lost vital funds needed for public services and infrastructure.

What was the outcome of Sri Lanka's shift to organic farming under Gotabaya Rajapaksa's policy?

The policy of forcing farmers to switch to 100% organic farming resulted in reduced agricultural output and higher food prices. Sri Lanka had to import rice, something it had never done before, which worsened food shortages and inflation.

How did the COVID-19 pandemic exacerbate Sri Lanka's economic problems?

The pandemic devastated the tourism industry, which is a crucial source of foreign currency for Sri Lanka. With tourism plummeting, the country faced an even greater shortage of foreign currency, worsening the economic crisis.

What role did corruption play in Sri Lanka's economic downfall?

Corruption played a major role, with billions of dollars spent on infrastructure projects, many of which failed or did not deliver expected returns. The misallocation of funds to ineffective projects deepened the financial crisis and undermined public trust in the government.

Why was there violence during the protests in Sri Lanka?

Violence broke out during protests due to the increasing frustration with the Rajapaksa government. Government supporters clashed with anti-government protesters, and there were incidents of storming government compounds and setting fire to homes of ruling party officials.

What is the current political situation in Sri Lanka?

The political situation remains unstable. President Gotabaya Rajapaksa appointed Ranil Wickremesinghe, a veteran opposition politician, as the new prime minister to form a unity government. However, many opposition parties refuse to join, and protests continue calling for the president's resignation.

What steps are being taken to address Sri Lanka's financial crisis?

Sri Lanka is seeking international support, with loans from India and China, and is in negotiations with the International Monetary Fund (IMF) for a bailout. However, the country faces significant challenges in securing a deal due to political instability and the need for economic reforms.