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Crisis in Sri Lanka

By Rick Majumdar |
May 14, 2022
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Sri Lanka - Hundreds of thousands of people took to the streets of Sri Lanka, May 9, to protest the deplorable state of affairs in the country. A failing governmental infrastructure has led to food insecurities, acute shortage of medicines and medical equipment in hospitals, prolonged power cuts, fuel crisis and exorbitant prices of necessities.

The island country has had a woeful bout with liberalization in its policies. Liberalization entails reduced governmental economic regulation and a higher influence of private companies and foreign entities on the economy of Sri Lanka. 

Sri Lanka was the first country in South Asia to have universal suffrage and it was also the first country to attempt economic liberalization. Liberalization was seen as the pathway towards nation building as attempts were made to replicate the successes of countries like Singapore, an open economy removed from state intervention.

In this process of liberalization, the country opened its doors to the International Monetary Fund first in 1965; the enacting of the IMF intervention would come into effect in 1988 as a structural adjustment. Liberalization of this country took place during the Civil War which started in 1983, initiated by violent pogroms of the minority Tamil population inhabiting the northern Provinces of Jaffna, Killinochchi, Mannar, etc. by the larger Sinhalese majority. The Civil War would come to an end in 2009 and by this time Sri Lanka had accepted 15 IMF loans. 

In 2008, with the global financial crisis, there was an impetus to invest in emerging markets like Sri Lanka, which brought foreign finance capital into the country. After an initial boom in the economy, with the country’s GDP rising to 8%, the bubble of growth burst and led to economic slowdown. By 2016, Sri Lanka went for another IMF loan, its 16th and final one to date. This got the snowball rolling and ultimately culminated into the situation we see today of perpetual debt-entrapment and economic collapse.

The COVID-19 pandemic which took hold of the entire globe had a terrible effect, particularly in the countries like Sri Lanka. Major disruptions came to the informal sector. The tourism industry, which is the center of the main foreign earnings, came to a standstill; exports of cash crops like tea, rubber and coconut came to a halt, and a bulk of remittances from migrant workers slowed down as well. This was compounded with the poor planning of the Gotabaya Rajapaksa government, which initiated tax cuts for the tourism industry and other corporations at the beginning of the pandemic, benefitting a small segment of the population while the large portions of the working people in the country suffered heavily. 

The neoliberal policies affected the agrarian sector as well, since state investment into agriculture decreased, leading to foreign dependency on imports and reducing self-sufficiency. During the pandemic and the emerging food crisis, people left the urban areas and moved back to the villages to cultivate fallow land and subsist. The economic failure in this sector came when the Rajapaksa government announced the banning chemical fertilizer subsidies, leading to crop failure. This, along with reduced foreign exchange, led to lower imports and ultimately food shortages. 

In the midst of this crisis, the JVP (Janata Vimukthi Perumana) the largest communist party of Sri Lanka, has emerged as the face of these massive protests across the country, the largest in the country’s history, demanding that the Rajapaksa government listen to the people’s demands. 

On April 17 the JVP announced a three-day protest and people’s march. People from all walks of life participated in these protests. These massive protests have also seen repression from the side of the government: military personnel and police have jailed, arrested and injured many. A curfew and shoot-on-sight order has been established by the government as well. Despite the unrest, the people’s demands will not be quelled by the violence from the Rajapaksa government.

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