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Sri Lanka’s worsening economic crisis
Conflict Weekly #116, 23 March 2022, Vol.2, No.52
An initiative by NIAS-IPRI and KAS-India Office
Conflict Weekly #116, 23 March 2022, Vol.2, No.52
Chrishari de Alwis Gunasekare
The worsening economic crisis in Sri Lanka
In the news
On 17 March, President Gotabaya Rajapaksa addressing the nation, on the current economic crisis claimed: “This crisis was not created by me. When those who contributed to the creation of this crisis are criticizing the government in front of the people today, I am attempting to immediately resolve this crisis and provide relief to the people... The root cause of current issues is our foreign exchange crisis.”
Issues at large
First, a brief note on the current economic crisis. Sri Lanka’s economy was hit hard by the Covid-19 pandemic. It is currently facing the most severe economic and energy crisis recorded in recent history due to the ongoing foreign exchange shortage. The prices of essential commodities have sky-rocketed as inflation hit 15 per cent year-on-year in February 2022, while people queue up for hours outside fuel stations and undergo regular power outages for as long as seven hours daily.
The tourism industry, one of the highest foreign exchange earners, decreased by 70.8 per cent in March 2020 as travel restrictions came into effect. This meant that the country, already struggling due to unsustainable public debt, experienced the rapid dwindling of its forex reserves which fell dangerously low as USD 1.5 billion in November 2021. The forex shortage resulted in the country being unable to pay for the import of essential commodities which in turn drove up the prices of many day-to-day necessities from food to fuel to pharmaceuticals. The rising cost of living has pushed close to 600,000 Sri Lankans below the poverty line.
Second, the energy crisis. The forex shortage has also triggered an energy crisis as the country is unable to pay for the import of fuel. The fuel shortage in the country has driven the prices of petrol and diesel up to unmanageable levels, and people are forced to queue up outside fuel stations daily. Moreover, the state electricity provider Ceylon Electricity Board (CEB) was prompted to impose daily load shedding as the fuel shortage impacts thermal power plants.
Third, the debt crisis. The country has to repay close to USD 7 billion in loan instalments and sovereign bonds in 2022, resulting in a budget deficit of USD 11.9 billion. However, this has not prevented Sri Lanka from going further into debt as the country is desperately attempting to shore up its foreign reserves. In December 2021, Sri Lanka raised the reserves via a USD 400 million currency swap with the Reserve Bank of India and another USD 3.1 billion swap agreement with China. Similarly, in March, the country acquired another USD 1 billion credit line from India for fuel and pharma imports and is seeking another USD 2.5 billion loan from China. Sri Lanka has already been negatively impacted by its unsustainable debt habits as international rating agencies downgraded the country’s sovereign rating last year citing the risk of debt default – which is a likely possibility unless the country restructures the existing debt.
Fourth, the misgovernance. The erroneous economic policies followed by the Rajapaksa administration are largely responsible for the current crisis. This includes measures such as tax cuts implemented in 2019 as part of the Rajapaksa election campaign which continued to incur budget deficits due to loss of revenue close to $550 billion, Central Bank’s money printing, and the refusal to devalue the rupee, introducing price controls for essentials which in turn resulted in the public having to face artificial shortages created by a burgeoning black market, and ultimately failing to seek an IMF bailout at an earlier stage. While the President had expressed willingness to work with the IMF, the initial assessment report from the IMF calls for drastic austerity measures from Sri Lanka in return. Perhaps as a prelude to subscribing to an IMF programme the government devalued the rupee in mid-March, reducing the buying power of the rupee by nearly 30%, further contributing to the rising cost of living and inflation rates.
Fifth, the external crisis. The island nation feels repercussions of external issues such as the Ukrainian war as the price of oil imports continues to rise globally. The situation is further is exacerbated by the fact that 30 per cent of Sri Lanka’s incoming tourists this year were from Russia, Ukraine, Poland, and Belarus – which had come to a grinding halt since the beginning of the war.
Sixth, the protests. The economic crisis has prompted widespread dissent – both political and non-partisan. Sajith Premadasa led Samagi Jana Balawegaya (SJB) took to the streets on 15th March, protesting the unbearable living conditions that the average citizen is being subjected to and demanding that Rajapaksa led the government to be ousted immediately. However, unlike previous expressions of dissent by the general public, the most recent protest was not mostly politically motivated but was instead a demonstration of the hardships of overwhelmed masses. This is further indicated by the wave of non-partisan people’s protests taking place each night where people line up the streets in silence, holding placards and lit candles. These protests are organized via social media and attract both the young and elderly from the suburbs of Colombo.
First, the current economic crisis in Sri Lanka is the result of several factors, namely the impact of the Covid-19 pandemic, debt mismanagement, and the lack of foresight in terms of economic policies implemented.
Second, if the government is to avert the possibility of default and the risk of falling into further debt, the only recourse available to Sri Lanka at present is turning to IMF to restructure debt. However, this would result in the population being subjected to strict austerity measures imposed by the IMF that would aggravate their economic suffering.
Third, Sri Lanka’s economic recovery would be an arduous and slow process that might take several years, even if there was a change in the administration. Therefore, while Sri Lanka has displayed resilience in the past, it is likely that the situation will get worse before it gets better.
Also from around the World
By Padmashree Anandhan, Sejal Sharma, and Satyam Dubey
Peace and Conflict from East and Southeast Asia
China: Beijing continue to face negative population growth
On 20 March, China’s Ministry of Civil Affairs (MCA) released statistics predicting that there would be a continuity of decline in the birth rate in Beijing. He said that the number of couples tying the knot had dropped sharply in 2021. Beijing is expected to continue to face negative population growth this year as 7.63 million couples registered to get married in China in 2021, which is the lowest since 1986, when the MCA released its data for the first time. An independent demographer reported on the decline in the number of young people in China, where more men were present than women of marriageable age. The decline in the willingness of Chinese women to get married was due to rising educational and economic development, which are the reasons why the number of marriage registration in Beijing has been on the decline for eight consecutive years.
China: Travel restrictions extended in 20 provinces due to rise in Covid cases
On 22 March, in response to the spread of COVID-19, more than 20 provinces and cities-imposed travel restrictions and lockdowns. The closed management and control have been imposed to control and contain the virus. The situation has deteriorated in more than 20 provinces and cities, including Jilin, Guangdong, Hebei, and Shanghai. Currently, China is passing through a battling situation after its biggest surge in two years, with numerous cities imposing travel bans and lockdowns, which have been affecting its economic stability and global supply chains. After the release of new guidelines by the National Health Commission, the Chinese President, Xi Jinping, said: ''Beijing will stick to its zero COVID-19 policy.''
Myanmar: The US alleges Myanmar’s military to be responsible for genocide
On 21 March, the US administration accused Myanmar’s military of committing genocide. US Secretary of State Antony Blinken pointed out the evidence gathered by the US on the Myanmar military involved in killings, rape, and arson. The decision comes as the evidence was collected from Amnesty International and Human Rights Watch organizations and independent researchers. Apart from this, Biden also declared USD one million as a fund to support Independent Investigative Mechanism. He said: "For those who did not realize it before the coup, the brutal violence unleashed by the military since February 2021 has made clear that no one in Burma will be safe from atrocities so long as it is in power.”
Myanmar: Japan, Cambodia urged the Burmese junta to comply with the ASEAN peace plan
On 21 March, the Prime Ministers of Japan and Cambodia urged the military junta of Myanmar to abide by the (ASEAN) five-point consensus and urged the government to pave the way to distribute much-needed humanitarian aid to the Burmese people. On a state visit to Cambodia, Japanese PM Fumio Kishida has discussed the need to strengthen the economic and security cooperation, the crisis in Myanmar and Ukraine, and his Phnom Penh counterpart. After the discussion, the Cambodian PM and the current chair of ASEAN, Hun Sen, said: ''We both agreed that the Naypyitaw authorities need to comply with ASEAN’s five-point consensus as soon as possible and to facilitate the distribution of humanitarian aid to the Myanmar people who are in need. At the same time, we both reiterated the importance of solving the crisis through negotiations with the relevant stakeholders.”
Myanmar: Resistance leader admits committing war crimes against charity workers
On 22 March, the head of the Yinmabin People’s Defense Force (YMB-PDF), Bo Thanmani, admitted to committing war crimes against the residents in the Sagaing region and killing the chairperson of the Arr Man charity by the fighters as earlier the residents informed that the junta soldiers raided the Myogon Ward monastery and shot dead the charity head. They raided there as they thought that some of the charity workers were PDF fighters and sealed the offices of several humanitarian associations in Yangon and Mandalay. The head of YMB-PDF and a former abbot, Bo Thanmani, said, “About the first six people killed [by YMB-PDF], we found out that they had carried out mine attacks on other people PDFs in the past. Our PDF members got angry as they questioned them about the attacks. When they finally admitted committing mine attacks, our members killed them out of anger.”
Singapore: Israel embassy to open after five decades of diplomatic ties
On 21 March, The Foreign Minister of Singapore, Vivian Balakrishnan, announced the opening of an embassy in Israel more than five decades after the two countries started their diplomatic ties. However, the timeline for the opening of the mission is yet to be provided. The Israeli counterpart, Yair Lapid, welcomed the Singapore government's move to open an embassy and called it a testament to both countries' good and unique relations. The idea of establishing an embassy in Israel came just over a month after Israeli Defence Forces Chief of Staff Aviv Kohavi visited Singapore to attend a weapons expo and met with the defense officials of the Asian nation. Singapore's Foreign Ministry issued a statement. They said that ''the embassy will serve as a focal point and support Singapore companies seeking to expand their collaboration with potential Israeli partners.”
Peace and Conflict from South Asia
India: Students’ demand for re-exams denied by the Minister of Education
On 21 February, Minister of Primary and Secondary Education BC Nagesh said that in any case, the Karnataka government has never allowed re-exams for a student who has abstained or is absent for an exam. After the Karnataka High Court verdict on banning Hijab wearing in schools and colleges, many science students did not take part in practical exams as they expected the final verdict from the high court to be in favour. Upon the judgment on banning students from wearing Hijab, the demand for re-exams has risen among the students resulting in a continued boycott of classes and exams. Minister for Primary and Secondary Education said: “We will not create a precedent by holding re-exams for absentees. They can appear for supplementary exams like everyone else. We are not going to make an exception.”
Sri Lanka: Parliament passes amendments to counter-terrorism law despite criticism
On 22 March, the Sri Lankan Parliament approved amendments to the controversial the Prevention of Terrorism Act of 1979, which has drawn widespread global criticism for including very harsh provisions. The bill to amend the controversial counter-terrorism law was approved with 86 votes in favour, and 35 against it in the 225-member Sri Lankan assembly with the main opposition parties including Samagi Jana Balavegaya (SJB), Tamil minority party (TNA) and the NPP voted against it. The amendments to the bill include reduction of the period of detention, the places of detention to be visited by magistrates to eliminate torture, detainees to be given access of lawyers, allowing communication with relatives and to expedite hearing of cases, and the introduction of a new section to allow bail for detainees as well. “The amendment is a puerile attempt at pulling the wool over the eyes of the world. It makes absolutely no change on the ground,” said MA Sumanthiran, the speaker of the TNA.
Sri Lanka: Rising elephant deaths
On 20 March, a tweet by an oscar-winning Hollywood star and environmentalist, Leonardo DiCaprio, done on 26 January, flamed the issue of the growing problem of wild Asian elephants dying after consuming open garbage dumps in Sri Lanka. The elephants in Sri Lanka are revered as cultural and religious figures in state and local events. Yet several elephants die on these garbage sites and the cases of deaths due to food poisoning are increasing each year, as informed by Tharaka Prasad, the veterinary surgeon and the current director of health at the Department of Wildlife Conservation (DWC). The Director-General of Sri Lanka’s DWC, Chandana Sooriyabandara, said, “The department has nothing to do with the setting up of these garbage dumps, but we have to eventually deal with them as elephants frequent the dumps. We are trying to minimize the impact, but it is an uphill task as 70% of Sri Lankan elephants can also be found outside protected areas.”
Pakistan: Prime Minister comments on the failure of OIC to support Palestinians and Kashmiris
On 22 March, Prime Minister Imran Khan, in a meeting with the Foreign Ministers, remarked that the Organisation of Islamic Cooperation (OIC) had failed to address the challenges of Islamic countries. The 48th session of the Council of Foreign Ministers (CFM) was hosted by Pakistan, focusing on the theme, “Partnering for unity, justice, and development.” In the speech, Imran Khan said: “We have failed both Palestinians and Kashmiris. I am sad that we have not been able to make an impact despite being the massive voice of 1.5 billion people.” OIC was formed to support the cause of the Palestinians and has been continuously criticized for not having a stance against Palestinians.
Afghanistan: UNSC extends the UNAMA mandate
On 20 March, UN Security Council announced the extension of the mandate of UNAMA to 12 additional months. The resolution was passed with 14 votes and Russia abstaining. Norway's permanent representative to the UN, Mona Juul said that the resolution provided a strong mandate to monitor and report on issues relating to human rights and facilitate humanitarian assistance. Afghanistan which is in a deep humanitarian crisis, the extension will benefit the Afghans, women, and help in coordinating the humanitarian needs. UN Communications Chief, Sam Mort reported that more than 13 million children in Afghanistan need educational or health support from the international. She urged for USD 2 million from the donor to support the Afghan children. So far, the support received marks to only 15 per cent, hence the drive to collect more funds is more than ever.
Peace and Conflict from Central Asia, Middle East, and Africa:
Armenia: Demands arise to restore its position in the Nagorno-Karabakh conflict
On 19 March, upon UN participation in the event of Azerbaijan, Armenia protesting the UN participation demanded to restore its position to neutral in the Nagorno-Karabakh conflict. The UN resident coordinator in Armenia, when asked to report, said that the Armenia government condemned the UN’s involvement in the event. UN is yet to respond to Armenia.
Saudi Arabia: Houthis attack civilian facilities; condemned by the US
On 20 March, Houthi rebels launched a fusillade of drone and missile attacks targeting an oil facility, a liquefied natural gas (LNG) plant, a water desalination plant, and a power station. The attack sparked a fire at one site and temporarily cut oil production at another. The impact of the attacks was controlled, and no casualties were reported. Civilian vehicles and homes in the vicinity were damaged. This latest escalation comes ahead of peace talks held by Saudi Arabia’s Gulf Cooperation Council, where the Houthi rebels were invited; however, the invitation was refused. In a statement to the White House, National Security Advisor for the United States, Jake Sullivan, condemned the Houthi attacks on civilian facilities in Saudi Arabia. He insisted on the urgent need to de-escalate the conflict in tandem with measures taken by the UN and called on the international community to follow.
Saudi Arabia: Anti-missile interceptors received from the US
On 21 March, the United States fulfilled an urgent request of the Saudi military by transferring a significant number of its Patriot anti-missile interceptors. The transfers are in light of the increasing tensions between Riyadh and the Iran-backed Houthi rebels in Yemen. The Saudi military had requested the transfers citing dangerously low reserves of the batteries. The move is seen as a renewed effort into the Washington-Riyadh relationship with the Biden administration in Office.
Mozambique: Tropical cyclone Gombe makes landfall
On 17 January, northern and central parts of the country experienced heavy torrential rainfall and damaging winds as tropical cyclone Gombe hit the mainland. The cyclone has resulted in heavy damage to infrastructure and human life. So far, 53 people have died and 80 people injured with at least 400,000 displaced. Southern Africa has seen a sharp rise in the intensity and frequency of tropical storms, which is suspected to be a consequence of global climate change.
Sudan: Armed groups attack Jabal Moon
On 17 March, an armed militia locally known as the Janjaweed killed at least 17 people and burned down four villages in the Jabal Moon mountain region. Three workers with Darfur-based Human Rights Monitors present there to assess and monitor the situation in the region were among those killed. The region has seen several attacks like these from the militia, also known as the Rapid Support Forces (RSF). The attacks are a part of the conflict between residents, RSF, and corporations over creating mining projects in the gold-rich area.
DRC: Attack on camp for displaced people kills 14
On 20 March, Coopérative pour le développement du Congo (CODECO) militiamen entered Drakpa and killed 14 people in a machete attack. CODECO is an association of various Lendu militia groups operating within the Democratic Republic of Congo. The victims included seven children, including a two-year-old child. The victims were displaced people from Ngotshi who were living in a camp in the Ituri region of Drakpa.
Sudan: UN Report on atrocities in Unity State
On 22 January, the UN Human Rights Office, OHCHR, issued a report on multiple killings and rampant sexual violence targeted towards civilians, especially women and children, in South Sudan’s Unity state. The report gave a horrific account of violence inflicted on civilians since the civil war started in 2013. The OHCHR has called for an immediate investigation into the matter and has called these acts constituting war crimes. The UN Mission in Sudan, UNMISS, and other humanitarian actors have increased efforts to assess and de-escalate the conflict.
Peace and Conflict from Europe and the Americas
Ukraine: Zelensky’s address to the Italian Parliament
On 22 March, Ukraine’s President Volodymyr Zelensky, in his address to the Italian parliament, reported on the situation of Mariupol. he said that there was “nothing left” in the city of Mariupol apart from the ruins. The key points in the address were, one, Zelensky called Italy to freeze the assets of the Russian Oligarchs. He said: “Freeze all their property, accounts and yachts. Freeze all the assets of those who have influence, let them use it for peace. Support sanctions against Russia, a full trade embargo, starting with oil.” Two, he urged the ministers to impose ban on Russian ships from entering Italy and asked to sanction all the banks of Russia. Third, he called in for help to remove Russian troops from the ground and stressed on “reconstruction of Ukraine.”
Europe: UN Secretary-General comments on Ukraine war
On 22 March, UN Secretary-General Antonio Guterres talked about a possible ‘global hunger crisis’ as a repercussion of the war in Ukraine. Guterres said: “Continuing the war in Ukraine is morally unacceptable, politically indefensible, and militarily nonsensical.” He also spoke about Russia’s invasion of Mariupol and said: “Even if Mariupol falls, Ukraine cannot be conquered city by city, street by street, house by house.” He then called the war “unwinnable” and would eventually be brought to a peace table from the battlefield.
Ukraine: City of Mariupol under constant target of Russia
On 20 March, hours after the bombardment, the port city in eastern Ukraine had received the heaviest bombardment and fighting the people had seen since Russia’s initial invasion. About 400,000 people have been trapped inside the city for two weeks since the Russians besieged it and restricted humanitarian corridors. Ukraine’s President Volodymyr Zelenskyy said: “that Russia’s siege of Mariupol was a terror that will be remembered for centuries to come.” However, Russia’s Defence Ministry blamed Ukrainian nationalists for causing the humanitarian crisis.
Russia: Phone call with the President of Uzbekistan
On 21 March, Russia’s President Vladimir Putin spoke to President of Uzbekistan Shavkat Mirziyoyev on a telephone call. The two leaders discussed bilateral cooperation and the implementation of agreements that the two countries were working on. Putin also informed Shavkat Mirziyoyev about the course of its special military operations to protect the Donbas region. According to Kremlin.ru, Shavkat Mirziyoyev understandably responded to Russia’s position and actions in the region.
Russia: Second launch of hypersonic missile
On 20 March, Russia launched a hypersonic missile for the second time to fuel deport in Ukraine. Previously the underground military base of Ukraine was targeted using advanced weaponry. Russian Defense Ministry confirmed the attack on the fuel storage and said that the missile could go 2,000kms, targeting at long range. It also claimed to have killed dozens of mercenaries through missile strikes. According to a spokesperson from the ministry: “High-precision air-launched missiles struck at the training centre for special operations forces of the Ukrainian armed forces, where foreign mercenaries who arrived in Ukraine were based.”
Europe: NATO supply air defense systems to Slovakia
On 20 March, the first units of the Patriot air defense systems from NATO partner countries arrived in Slovakia. Slovakia's Defence Minister Jaroslav Nad stated that the systems would be set up at the Sliac airport. As a part of NATO, Germany and Dutch soldiers would operate them to strengthen air defenses in Eastern Europe further. However, Slovakia's Russian-made S-300s would not be replaced, and the new defence systems were just an addition.
Guatemala: Dozens of Cuban migrants detained
On 22 March, two boats carrying 50 Cuban migrants and two Honduran migrants were detained by the National Defence Navy in the area of Rio Dulce. Another eight Cuban migrants who were traveling by land were also detained. The migrants had set out towards the United States from Honduras and were sent back. At least 84 Cubans have been expelled for trying to enter the US through Guatemala illegally. Border restrictions for the US have been tightened, making migrant detentions a frequent phenomenon.
Cuba: Anti-government protestors sentenced to jail terms between six to 30 years
On 17 March, the court sentenced more than 100 protestors to prison for being guilty of sedition and theft. The jail term stretches from six to 30 years for the protestors who took part in anti-government demonstrations in July 2021. The protests came amidst a severe economic crisis in the country, against soaring inflation and shortage of food and medicines. Impromptu rallies witnessed violent police crackdown, where the ruling party called the protests a coup attempt backed by the US. The court found the accused guilty of damaging public property and attacking the police and government agents.
Mexico: Indigenous rights activist murdered
On 22 March, an armed group entered a house where festivities were being held and robbed people of their possessions. Amid escalations, Mexican lawyer and indigenous rights activist Patricia Rivera Reyes was shot dead. Another man was shot in the head and was later taken to a local hospital. The incident puts the tally of journalists murdered in Mexico this year, to eight. The journalists have been targeted for reporting against drug cartels and mafia in the country.
Nicaragua: Indigenous community leader killed
On 17 March, Salomón López Smith, leader of the Mayangna indigenous community, was found dead in a remote area in Matumbak territory. The incident has been reported as a hate crime as the body was found mutilated and tortured. Smith, an influential member of the community, had been missing for a week before the body was found. The region has seen several attacks on the Mayangna and Miskito community from settlers who were largely former soldiers linked to illegal timber and logging interests. In the last two years, over 28 indigenous leaders have been killed.
The US: First African American women appointed in Supreme Court
On 21 March, Judge Ketanji Brown Jackson was nominated to serve in the Supreme court. In her vow, she said: “Equal Justice Under Law, a reality and not just an ideal.” She committed to taking a “neutral stance,” and promised to work on transparent means to ensure that the litigant was heard by the Judge. Apart from this, she added: “I evaluate the facts, and I interpret and apply the law to the facts of the case before me without fear or favour, consistent with my judicial oath. I know that my role as a judge is a limited one.”
About the authors
Chrishari de Alwis Gunasekare is a Research Assistant at the Sri Lanka Press Institute. Padmashree Anandhan is a Project Associate at the School of Conflict and Security Studies, NIAS. Sejal Sharma and Satyam Dubey are postgraduate scholars at Pondicherry University.
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