what’s happening in sri lanka
This week has brought Sri Lanka into Russian media spotlight twice. First, Aeroflot announced the launch of flights to Colombo starting April 8. Second, the country has faced deepening instability: security personnel assigned to gas stations took to the streets amid protests sparked by fuel shortages.
In one long queue for fuel, a motorcyclist was reportedly killed by a driver. Channel News Asia also reported that three elderly people waiting for days in line died. Daily blackouts have become common, with the island nation cutting electricity for seven and a half hours because there is not enough fuel to run power plants.
The Public Utilities Commission explained that the government lacks the currency needed to import oil, making it harder each day to keep power plants operating. Today Sri Lanka also grapples with shortages of food and basic goods. The country relies heavily on imports for many items, including medicines. Reports indicate schools canceled exams due to paper shortages as well.
Energy Minister Uday Gammanpila described the crisis as the worst the country has seen since gaining independence in 1948.
what caused the crisis?
A week earlier, Bloomberg highlighted Sri Lanka’s looming default. Early in the month, the country held about $2 billion in foreign exchange reserves, with roughly $7 billion in government debt and $1 billion in bond debt due within the year, according to the report.
Overall, Sri Lanka owes foreign creditors about $45 billion, with $15 billion in government bonds. With rising oil prices and falling tourism revenue, authorities have sought to prevent the worst outcomes by raising interest rates, devaluing the currency, and limiting nonessential imports. Inflation around 15 percent poses a major challenge for policy makers.
President Gotabaya Rajapaksa has turned to the International Monetary Fund for help, yet the systemic nature of the financial problems may require substantial funds and time that the country currently lacks.
The economy started to struggle during the COVID-19 crisis. Nikkei Asia described the period as a ticking time bomb that could explode at any moment. As activity slowed sharply, Sri Lanka expanded money supply heavily, with estimates showing a 42 percent rise from December 2019 to August 2021, while foreign exchange reserves dwindled.
But the roots of the current crisis extend beyond the pandemic. Since 2009, the island has carried heavy debt incurred while rebuilding after a long civil conflict between the Sinhala Buddhist majority and the Tamil Hindu minority. Ongoing debt payments have strained foreign reserves, especially as the pandemic disrupted earnings and growth.
During the postwar rebuilding, authorities reportedly spent around 1.5 to 2 billion dollars annually on transport infrastructure, financed through borrowed funds. Tourism once promised a robust revival; Sri Lanka earned about $3.6 billion from travel in 2019, a figure that surged in the following two years before the pandemic. Visitors from Russia, Ukraine, Poland and Belarus continued until the protests began, but tourism has fallen sharply since.
who bears responsibility?
Experts interviewed by socialbites.ca point to multiple factors, with misjudgments by local authorities playing a key role. MGIMO professor Sergei Lunev links the crisis to global dynamics, noting sharp increases in energy and raw material prices. He sees the pandemic impact followed by the war in Ukraine as part of a global shock that Sri Lanka cannot escape on its own.
Lunev also criticized the government led by Prime Minister Mahinda Rajapaksa for corruption, arguing that poor governance worsened the situation. IMEMO RAS researcher Aleksey Kupriyanov highlighted the effects of the currency devaluation and drew a parallel with India’s 1991 financial crisis. He warned that the country faces a serious problem in securing money to buy food, medicine, and fuel. While relief from the IMF seems likely, Kupriyanov noted that any rescue would require foreign currency reserves from other sources to stabilize the situation. He stressed that Sri Lanka’s debt resembles delicate silk, and restructuring will be a long, delicate process rather than a quick fix.