Plunge Into The Ultimate Economic Downfall Of Ceylon
Srilanka could be a beautiful place with clean and fresh beaches, streets, heritage buildings, delicious cuisine and lively people, but right now the Srilankan Paradise is drowning in debt. It is heart-wrenching to see our neighbor bleed in corruption and a lot of foreign debt. It is said that the root cause of the crisis lies in the economic mismanagement of successive governments.
The Rajapaksas are the present first family of politics in the island nation. They hold nine ministerial berths including seven cabinet posts in the Srilankan government.
This crisis was first accelerated by the Sri Lankan president Gotabaya Rajapaksa, who promised massive tax cuts during a 2019 election campaign, and that led to the tremendous loss in Sri Lanka’s economy.
The Cabinet had cut the value added tax to 8% from 15% and also abolished seven other taxes. This led Sri Lanka to lose access to international financial markets.
And in 2021, the government decided to ban all chemical fertilizers, to make the nation the first in the world to practice “organic-only” agriculture. This move was reversed later, but it triggered a critical drop in the country’s farm sector.
The biggest industry in Sri Lanka is tourism. The country was rated as the number one destination to visit by Lonely Planet magazine in 2019. But the bomb blasts and terrorist attacks had an obvious effect on tourism. Also, the COVID-19 pandemic gradually weakened the country’s tourism industry which was producing a great deal of profit.
Tea cultivation, which was one of the mainstays of the economy, was also badly hit. The output of pepper, cinnamon, and vegetables also went down by 30%. This forced the government to depend even more on foreign countries for rice and other staples.
The situation became even more awful as a critical lack of foreign currency left Srilanka unable to pay for its vital imports. In March 2022, Srilanka announced nationwide 13-hour daily power cuts. The push into darkness and the severe food shortages made the Srilankan people furious.
While we are getting to know about the crisis in the comfort of our air-conditioned room, people in Sri Lanka are standing in queues for food and fuel that extend 2-3 km long. The vendors in Columbo are on the front line of the worst economic crisis. There are power outages daily, a critical shortage of life-saving medicine, and basic food staples such as rice and milk are hard to come by.
Their anger got spilled onto the streets on the 1St of April when the demonstrators tried to storm the president’s home. Following the violence, a 36-hour curfew was imposed.
The crisis deepened when all 26 ministers aside from President Gotabaya Rajapaksa and his elder brother Prime Minister Mahinda Rajapaksa stepped down. Meanwhile, Rajapaksa has also sought help from China and India. India has signed a $1 billion credit line for importing essentials, including food and medicine. China is also offering the island nation a $1.5 billion credit facility and a separate loan of up to $1 billion.