How bad is the crisis in Sri Lanka? Why did the island nation go broke? And what lies ahead? | EXPLAINER by ChrisBarrett_
I the heart of Colombo, the Galle Face Green is full of activity, from morning joggers and children playing cricket to locals and tourists surveying food stalls. Lately, however, the oceanside park and promenade in Sri Lanka’s commercial capital has been occupied by another group – anti-government protesters – as Sri Lanka has slumped to its worst financial crisis since independence from Britain in 1948.
Its latest predicament has triggered calls for the resignation of President Gotabaya Rajapaksa, whose brother, Mahinda Rajapaksa has resigned as prime minister and fled to Trincomalee naval base. Gotabaya has refused to stand down. Instead, as a curfew was imposed during violent protests in May and police were ordered to shoot looters on sight, Gotabaya appointed Ranil Wickremesinghe – a five-time former prime minister – to replace his brother.
The new prime minister Wickremesinghe, whose government has raised taxes in an effort to generate revenue, has been tasked with negotiating a bailout with the International Monetary Fund. But he warned Sri Lankans this period would be the most “difficult ones of our lives”.Getty ImagesThe stripping away of tourism during the pandemic has been blamed for some of the economic woes.
Embedded corruption is a factor too, says the executive director and founder of the Centre for Policy Alternatives in Colombo, Paikiasothy Saravanamuttu. He says yet another factor is the costly militarisation of the country. The ranks of its armed forces bulged even after the end of the civil wa, expanding in former conflict zones in the north and east.
China represents a tenth of Sri Lanka’s foreign debt – the same share the country owes to Japan. But experts believe the burden to be significantly greater when money owed to Beijing’s state-owned companies is taken into account.
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