Remember how Sri Lanka managed to wreck agricultural yield by forcing the country to use organic fertilizer? “Not only had Sri Lanka’s ban on fertilizers, pesticides, weedicides, and fungicides resulted in massive food shortages, it also led to the doubling in price of rice, vegetables, and other market staples.”
Sri Lanka’s prime minister is increasing efforts to revive the country’s “completely collapsed” economy amid a lack of foreign exchange reserves and severe shortages of essential items.
“We are now facing a far more serious situation beyond the mere shortages of fuel, gas, electricity, and food. Our economy has faced a complete collapse,” Prime Minister Ranil Wickremesinghe told parliament on June 22.
“It is no easy task to revive a country with a completely collapsed economy, especially one that is dangerously low on foreign reserves,” he said.
This video goes into more depth of just how badly Sri Lanka is screwed.
Some takeaways:
“The government’s gross mismanagement in agriculture is just a small symptom in a much larger problem. Sri Lanka has run out of money and is now facing down the barrel of complete economic collapse.”
“In a span of just two years, its reserves of foreign currency has gone from $9.2 billion to just $50 million, not enough to cover a single day’s worth of imports, and not nearly enough to cover the $6.6 billion it needs to make loan payments. On April 12th, the government announced it will no longer be making such payments as a result it’s been cut off from international loans.”
“Basic necessities are hard to come by and daily rolling blackouts are shutting down businesses.”
Sri Lanka may be the first poorly managed developing country to fall, but it won’t be the last.
On paper, it shouldn’t be a basket case. It had a thriving tourism industry before a 2019 terrorist attack and 2020’s Flu Manchu.
“Sri Lanka, being a small developing country, imports a huge amount of commodities. As such, it’s been running a large trade deficit.”
Enter the nepotism:
Strongman Gotabaya Rajapaksa Gota built a name for himself viciously ending the civil war as head of the ministry of defense, with his brother Mahinda acting as president from 2005 to 2015. Gota ran on the promise of bringing forth vistas of prosperity and splendor in wake of an opposition party seen as too weak to handle domestic threats. Gota’s party won a landslide victory in parliament and he appointed his brother as prime minister. With a two-thirds majority, Gota quickly got to work rewriting the constitution, allowing him to appoint many top-level officials, including ministers and judges. He stuffed these positions with relatives, and has been slowly cementing greater unrestrained power.
How did he deal with the tourism downturn? He started printing money. “The budget deficit widened and its stockpile of foreign currency started to burn away.”
“Now more than ever, Sri Lanka was burning through its foreign reserves. This was further accelerated by the government’s desire to keep the rupees exchange rate at 200 rupees equal to one US dollar.” In the post-Bretton Woods world, fixed exchange rates are disasters waiting to happen.
The attempt to defend the rupee meant that foreign currency reserves went from $9.2 billion to just $1.6 billion in 2021.
“This caused the government to enact strange policies, like banning the importation of fertilizer in hopes of easing its trade deficit. Claiming the ban was to make Sri Lanka organic was simply a way to conceal its dire situation.” Yes, cutting back the ability of your own people to grow food in order to hide the manifest incompetence of your economic policies is quite the recipe for happiness.
Then Russia invaded Ukraine, and prices for food and energy skyrocketed.
“Basic necessities in Sri Lanka have become too expensive. The rupee is now just half of its original value. Schools have stopped testing for certain grades because they can’t buy ink.”
“The government has instituted daily 15 hour blackouts to save on energy imports but they have crippled industries. The nation has declared a state of emergency as massive mobs attack politicians and even set roadblocks to prevent them from escaping the country.”
Sri Lanka may be the first, but it won’t be the last.
With rapid global commodity inflation, supply shortages, and the likely coming global recession, many nations appear to be on the tipping point. There is growing unrest in Tunisia because of prices. Pakistan’s currency is plummeting and Argentina’s economy is straining under the weight of massive debt. The longer current conditions persist, the more likely we are to see what is happening in Sri Lanka to happen across the globe.
This entry was posted on Thursday, June 23rd, 2022 at 1:50 PM and is filed under Economics, Foreign Policy. You can follow any responses to this entry through the RSS 2.0 feed.
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It’s been coming for awhile. I remember talking to Sri Lankan TCN employees of the US Army or its contractors in Kuwait and Iraq, and the situation they described was mind-bogglingly bad then.
You know you’ve got problems when you have senior lawyers with graduate degrees in law being able to make more money as kitchen help working for the US Army in Kuwait, and that was the situation for at least one of the folks I used to talk to. Who would be to blame, here? Well, his take on it was that it was an artifact of the post-colonial clusterf*ck, and if it was up to him, he’d solidly go back to being “exploited” by the Brits. At least, they knew how to run things… Or, such was the sentiment.
I would laugh my ass off if one of the things coming out of the next century is former colonial nations going “Y’know… This independence thing ain’t all that it was cracked up to be… How’s about we become colonies of yours, again…?”
Unlikely, but you can hear a lot of the people living under those conditions expressing sentiments like that.
One of the guys I went to the AF Academy with was a foreign exchange cadet from Sri Lanka. I recently chatted with him over Facebook and he was extremely angry with the political leaders of his nation – all of them for sure, but especially with the two brothers, Gota and Mahinda. Apparently, my buddy Ayub is not alone -there are a lot of Sri Lankans who would probably string those two up Mussolini-style if they could get their hands on them.
The Americans living in certain urban areas might want to pay attention – there is a price to be paid for putting incompetent and corrupt people in charge and leaving them there for decades. And it may take a while, but the US as a whole may have to learn this lesson as well….
[…] as long as 18 years, also, Communists in the U.S. vs. Communists in North Korea BattleSwarm: Sri Lanka Is Screwed Behind The Black: University Of Houston Forced To Allow Freedom Of Speech, Blue Origin […]
I lived there for a while back in the bad old days, when the war had been going for years already, and there was still no end in sight. Heartbreaking that those are now the good old days.
It’s been coming for awhile. I remember talking to Sri Lankan TCN employees of the US Army or its contractors in Kuwait and Iraq, and the situation they described was mind-bogglingly bad then.
You know you’ve got problems when you have senior lawyers with graduate degrees in law being able to make more money as kitchen help working for the US Army in Kuwait, and that was the situation for at least one of the folks I used to talk to. Who would be to blame, here? Well, his take on it was that it was an artifact of the post-colonial clusterf*ck, and if it was up to him, he’d solidly go back to being “exploited” by the Brits. At least, they knew how to run things… Or, such was the sentiment.
I would laugh my ass off if one of the things coming out of the next century is former colonial nations going “Y’know… This independence thing ain’t all that it was cracked up to be… How’s about we become colonies of yours, again…?”
Unlikely, but you can hear a lot of the people living under those conditions expressing sentiments like that.
Maybe they could sell their country to China. That’s the ticket!
One of the guys I went to the AF Academy with was a foreign exchange cadet from Sri Lanka. I recently chatted with him over Facebook and he was extremely angry with the political leaders of his nation – all of them for sure, but especially with the two brothers, Gota and Mahinda. Apparently, my buddy Ayub is not alone -there are a lot of Sri Lankans who would probably string those two up Mussolini-style if they could get their hands on them.
The Americans living in certain urban areas might want to pay attention – there is a price to be paid for putting incompetent and corrupt people in charge and leaving them there for decades. And it may take a while, but the US as a whole may have to learn this lesson as well….
> “…even set roadblocks to prevent them from escaping the country.”
Um. They do realize that Sri Lanka is an island, right?
Presumably to keep them from getting to an airport or port.
[…] as long as 18 years, also, Communists in the U.S. vs. Communists in North Korea BattleSwarm: Sri Lanka Is Screwed Behind The Black: University Of Houston Forced To Allow Freedom Of Speech, Blue Origin […]
I lived there for a while back in the bad old days, when the war had been going for years already, and there was still no end in sight. Heartbreaking that those are now the good old days.
[…] Lawrence Kişisinin BattleSwarm Blogu: sri lanka vidalanmış […]