Sri Lanka in mighty crisis

 Sri Lanka in mighty crisis

Sri Lanka's President Gotabaya Rajapaksa fled his official residence in Colombo on Saturday just before thousands of protesters broke through police barricades and stormed the compound.

Immediately after that Prime Minister Ranill Wickramsinghe has tendered his resignation - leaving the country in tatters, rudderless without a proper leadership.

Demonstrators from across the country arrived in buses, trains and trucks to Colombo earlier on Saturday to express outrage over the government's failure to protect them from economic ruin.

Sri Lanka’s debt-laden economy has “collapsed” after months of shortages of food, fuel and electricity,

The Sri Lankan economy is foundering under the weight of heavy debts, lost tourism revenue and other effects of the pandemic, as well as surging costs for commodities. The result is a country hurtling towards bankruptcy, with hardly any money to import gasoline, milk, cooking gas and toilet paper.

Sri Lanka is unable to purchase imported fuel due to heavy debt owed by its petroleum corporation.

The Ceylon Petroleum Corporation is $700m in debt. As a result, no country or organization in the world is willing to provide fuel. They are even reluctant to provide fuel for cash.

The foreign currency crisis has crimped imports, creating the severe shortages that also include medicine and forcing people to stand in long lines to obtain basic needs.

Sri Lanka has been muddling through, mainly supported by $4bn in credit lines from neighbouring India.

It also has received pledges of $300m to $600m from the World Bank to buy medicine and other essential items.

Sri Lanka has already announced that it is suspending repayment of $7bn in foreign debt due this year, pending the outcome of negotiations with the International Monetary Fund on a rescue package. It must pay $5bn on average annually until 2026.

The economic crisis in Sri Lanka is spiralling into a humanitarian emergency as millions of people face acute shortages of food, fuel, cooking gas and medicine.

The civil unrest and food shortages gripping the country were sparked by an economic crisis that has been developing throughout the COVID-19 pandemic. Sharp declines in agriculture production have resulted in rapid price increase for staple food items like rice and vegetable, which directly impact the household economy and food security of the most vulnerable.

Protests have raged since April, with demonstrators blaming President Gotabaya Rajapaksa and his government for policy blunders that torpedoed the economy and plunged the nation into chaos. In May, a wave of violent protests forced Rajapaksa's brother and then-prime minister Mahinda Rajapaksa to step down. His successor, Ranil Wickremesinghe, was banking on a bail-out package from the International Monetary Fund and help from friendly countries like India and China to keep the economy afloat.

Sri Lanka's economic predicament was compounded by a ban last year on imported chemical fertilizers that angered farmers and hurt harvests. The ban was lifted after six months, but the damage was already done, leading to food shortages.

Down to the dregs in forex holdings, critically short of fuel and cooking gas, and virtually abandoned by China, Sri Lanka is giving up its ingrained reservations about the United States and the Middle Eastern Islamic countries, and is seeking their help to tide over the multiple crises Colombo is facing now.