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“It fell.” “Serious situation.” And a potential “fall to the bottom.”
These are some of the ways in which the Sri Lankan prime minister described his country’s volatile economy on Wednesday as the island nation faces extreme food and fuel shortages.
Prime Minister Ranil Vikremesinghe’s comments to parliament come after weeks of turmoil caused by government incompetence, experts say – dynamics driven by global inflation and supply chain disruption amid Russia’s invasion of Ukraine and the continuing effects of the coronavirus pandemic. .
Sri Lanka is closing, families are fighting for food as the crisis deepens
“We are now facing a much more serious situation beyond the usual shortages of fuel, gas, electricity and food,” Vikremesinghe said in Sinhala. “Our economy is facing a complete collapse.”
Sri Lanka, a country of 23 million people off the southeast coast of India, has essentially closed the door on fuel supplies as its national Ceylon Petroleum Corp. has $ 700 million in debt.
“No country or organization in the world wants to provide us with fuel,” he said. “They’re not even willing to provide fuel for money.”
Economic chaos follows an explosion of political unrest: Protests sparked by looming economic uncertainty and anger over corruption among the Rajapaska ruling family forced President Gotabaya Rajapaska to expel his brother Mahinda Rajapaksa from the prime minister’s office last month. Wickremesinghe was appointed shortly afterwards.
Inside the collapse of the Rajapaksa dynasty in Sri Lanka
Although Wickremesinghe’s proclamation was dramatic, it was not necessarily exaggerated. “The economy is certainly on the verge of collapse,” said Nirvikar Singh, a professor of economics and expert on South Asia at the University of California, Santa Cruz. The government is “surprisingly irresponsible and incompetent” after mismanaging the country’s monetary and economic policies from 2019, he said.
In recent days, gasoline queues have stretched for miles. Schools and government offices in major cities were closed for at least a week on Monday as fuel shortages forced the country to stop.
Food insecurity has also hit Sri Lanka, with data from the country’s central bank showing a sharp rise in prices for all food products. Rice, the country’s main product, costs almost three times more than a year ago. Prices of basic products such as tomatoes have quadrupled compared to the previous year. Last week, government officials were asked to grow their food in their backyards.
Schools and government offices in Sri Lanka’s major cities have been closed for at least a week on June 19 due to severe fuel shortages. (Video: Reuters)
Signs of a devastating crisis are everywhere, including a shortage of medicines in hospitals and businesses on the verge of closure. At the main public hospital in the capital, Colombo, basic supplies such as medicines and catheters are scarce.
“We are trying to do it somehow, but there is a shortage,” said hospital spokesman Pushpa De Soyza. “We just have to be smart in using what we have.”
In the nearby, once bustling Colpetty district, restaurant owner Pradeep Vithanachchi is forced to turn to the black market for cooking gas, which is hard to find and expensive when offered sporadically.
“Now this is an existential crisis for both business and us,” he told the restaurant, a place he inherited from his father for four decades.
Sri Lanka expects borrowing from the International Monetary Fund, which Wickremesinghe says will not only provide tangible aid but also act as a “seal of approval” so that “the world will trust us again”, allowing the country to receive low-interest loans from other countries.
Reducing growth is a matter of serious concern, economists say. Achilles Kadirgamar, an economist at Jaffna University in the country, said the economy is likely to shrink by 10 per cent. “People have given up production and there is no planning or process to deal with it,” he said, adding that it would take at least five years for the country to find a solid foundation again.
Singh said that international financial assistance “should be able to turn things around relatively quickly, although there will be painful consequences”. He noted that Sri Lanka is a relatively small economy, which means that the finances needed to raise the island from its economic implosion “are not large on a global scale”.
If Sri Lanka emerges from the chaos, the experience will offer a positive side, Singh said, as economic concerns swirl around the world.
“Sri Lanka is teaching other countries the basics of economic governance,” he said. “These lessons are not new, but they are sometimes forgotten.”
Masih reported from New Delhi and Faris from Colombo.
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