Rather than turning to the International Monetary Fund, whose rescue programs are conditional on tough policy reforms, Colombo approached China for a fresh loan.
, one must ask how this could happen in a country historically known for its high standard of living and stable economy.
In 2019, President Gotabaya Rajapaksa announced a round of mindless tax cuts, depriving the state of sorely needed revenue. Then, in 2021, his government abruptly banned imports of chemical fertiliser and pesticides. While the aim of the policy was to stall foreign-exchange outflows, the main result was a dramatic reduction in domestic food production, leading to acute food shortages this year.was the government’s ongoing effort to keep the Sri Lankan rupee artificially strong.
Consider Hambantota Port, the pet project of Mahinda Rajapaksa, Sri Lanka’s president between 2005 and 2015 . Funded largely with Chinese money, the port opened in 2010 on Mahinda’s birthday. But when Sri Lanka later failed to repay the debt, this “gift” became collateral to be confiscated. China now has a 99-year lease on the port.
When the Rajapaksa government returned to power in 2019, it was riding a wave of support that it sought to sustain with ill-advised economic handouts. But the public’s patience can be bought for only so long. Eventually, unsustainable policies run into a wall.
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