# Prem Sagar Poudel
Lee Kuan Yew, the architect of modern and prosperous Singapore, said in 1970, “I want to make Singapore like Sri Lanka.” During the 70s, Sri Lanka was a development model for not only Lee Kwan but for all. However, today every Sri Lankan is saying, ‘If only our children could take the exam.’
There are several reasons why Sri Lanka, a prosperous country in Asia, has reached its present state. However, the Western media blames the Sri Lankan crisis on Chinese debt. Many forget the fact that China’s share of Sri Lanka’s foreign debt is only 10 percent. While blaming China.
However, in recent times, the government of Sri Lanka was run by the family of President Gotabaya Rajapaksa, who was the leader of Sri Lanka. There were six members of the Rajapaksa family in the Council of Ministers. Therefore, Rajapaksa’s family worked behind the current situation in Sri Lanka. 12 out of the 17 years since 2005, the Rajapaksa family has ruled Sri Lanka. Rajapaksa family’s two brothers ruled the country.
Gotabaya Rajapaksa, the president who is banished by the people, is a former lieutenant colonel. He was elected President for the first time on 18 November 2019. Gotabaya, who loved US citizenship more than the lieutenant colonel post, took the oath of office at a Buddhist temple in Anuradhapuram. He took charge of the office after worshiping in Shri Mahabodhi.
Gotabaya and his family went to America in 1998. Also took the citizenship there. In 2005, Gotabaya came to Sri Lanka to help in the election when his brother Mahinda Rajapaksa became the candidate for the presidential election. When Mahinda Rajapaksa was elected president, one third of the country’s territory was directly occupied by the Liberation Tigers of Tamil Eelam (LTTE), who were waging an armed rebellion to create a separate, independent, and sovereign state for the Tamils.
The Tamil insurgents were supported by secret funds of India’s central government’s intelligence agency ‘RAW’ and open of the provincial government of Tamil Nadu to set up training camps and train in Tamil Nadu. The Tamil rebels had not only the army, but also air force, fighter jets, marines and attacking fighter mortar boats. Gotabaya, the brother of President Mahinda Rajapaksa, was an experienced fighter in Sri Lanka’s civil war.
In 2005, brother Mahinda, who became president in the middle of a raging civil war, appointed the competent and totally trustworthy brother Gotabaya as Sri Lanka’s defense minister. The LTTE started the war on 23 July 1983. It ended on 18 May 2009 when Gotabaya was the Defense Minister and his brother Mahinda the President.
From the early 1980s, the Tamil rebel LTTE was trained by India to fight the Sri Lankan army in Tamil Nadu’s Kolthur region. Such training was started under the direction of Indian Prime Minister Indira Gandhi. Tamil Nadu Chief Minister MG Ramachandran also supported the move. Britain, France, and America also contributed to this work started by India.
Since 2007, the United States has stopped to provide arms to the Sri Lankan government and military amid the war, claiming that the ethnic cleansing of the Tamil minority had occurred. Such a decision of the US helped the Tamils. In this situation, the Mahinda Rajapaksa government decided to buy arms from China. Sri Lanka, torn by a long civil war, did not have enough money to buy weapons. Due to the lack of weapons, there was no other option to surrender with the LTTE. Amid such difficulties, Mahindra had been to China.
China lends US$1 billion to buy weapons. To counter the LTTE’s Air Force China gifted 6 fighter jets to the Sri Lankan Air Force. China also arranged to train the pilots of these fighter planes through Pakistan. With the help of modern weapons provided by China, the civil war ended completely within four years.
The West, especially the US, did not want to end the civil war in Sri Lanka. India was on the side of LTTE. In this situation, China’s support became like medicine for Sri Lanka. However, Mahindra failed in management after the civil war. As a result, Maithripala Sirisena was elected president in the 2015 election. During Sirisena’s tenure, China leased Sri Lanka’s Hambantota port for 99 years in 2017.
Since 2009, China has been investing in Sri Lanka’s infrastructure development. The analysis of the Western media is that Sri Lanka has started to fall due to the same investment. However, the reality seems to be different. China’s share in Sri Lanka’s foreign debt seems to be around 10 percent. This is also an investment after 2005.
People in trouble
Sri Lanka’s gross domestic product was $234 billion. It is the strongest economy in South Asia. The average annual economic growth rate was 7.45 percent. As of 2019, the per capita income of Sri Lankan citizens was 11,069 US dollars. Annual remittances of US$ 6 billion were brought in by Sri Lankan workers. Sri Lanka was concentrated in export trade including rubber, tea, coconut, tobacco, telecommunications, garments, and precious stones. Before the economic crisis, the number of citizens living below the poverty line was only 4.3 percent. All the statistics showed that Sri Lanka was on the way to prosperity.
About to pass a cycle of prosperity, it seems that the number of people is increasing who want no country to fall into the same problem as Sri Lanka. Sri Lanka, which is called the tears of pearls, has now reached a state where it cannot hold the tears of the people. Now in Sri Lanka, the prices of daily necessities have increased dramatically. The government has not even been able to buy paper for printing question papers for school examinations. As a result, the education of thousands of students has been affected.
Energy crisis and price hikes have hurt common people. Despite standing in line for hours, people have not been able to get the fuel. Some have lost their lives while standing in long queues for daily necessities. To control the tension caused by the petroleum crisis, the government has deployed the army to distribute oil and gas. There is a lack of essential items like powdered milk, sugar, cereals, wheat, along with medicine.
The current economic crisis in Sri Lanka is the biggest economic crisis since independence from Britain in 1948. Sri Lanka’s economic crisis has now become a topic of global discussion. Basically, the following reasons seem to be behind Sri Lanka’s economic crisis.
1. Nepotism
For a long time, the Sri Lankan government was under the control of a limited number of people. The Rajapaksa family came out of power in the 2015 elections. However, on 21 April 2019, international Islamic terrorists carried out suicide bombings in seven places on the same day. At that time, it was four days before Christmas, the biggest Christian festival. Two hundred and fifty-nine people died from the explosion. Five hundred people were injured. This lack of security in the capital city left the people of Sri Lanka reeling.
After 10 years of the end of the Tamil rebellion, there was a discussion about the need for a firm and strong leader who could free the people from terrorism. Gotabaya, who had the image of a war hero, rose in the eyes of the Rajapaksa Party and the Sinhalese people. 75 percent majority of the Sinhalese stood in favor of Gotabaya. As a result, he returned power to the Rajapaksa family by getting 52.25 percent of votes.
The Rajapaksa family is always in dispute about how the loan taken by Sri Lanka to suppress the LTTE was spent. Of course, due to the nepotism imposed in Sri Lanka for a long time, the system was not able to work. Sooner or later there were signs that Sri Lanka would go the way it is now. However, due to the economic crisis faster than expected, Sri Lanka has become a topic of discussion around the world. It seems that the international image that the Rajapaksa family has lost in recent times also works behind it.
2. Foreign debt
Sri Lanka now has a public debt of around 105% of GDP. About 42 percent of that is sovereign bonds. Sovereign bond debt has a shorter repayment period. Its interest rate is also higher. As the economy weakens and credit ratings begin to decline, such loans become more expensive. About a month ago, the Sri Lankan government was listed as a defaulter for the first time in its history after failing to pay two sovereign bonds even within a 30-day grace period.
By the year 2022, Sri Lanka must repay debt seven billion US dollars. As of March 2022, Sri Lanka has foreign exchange reserves of USD 1.9 billion. When the new government was formed three years ago, Sri Lanka had foreign exchange reserves worth 7.7 billion US dollars. Analyzing these data, it appears that Sri Lanka is unable to pay other debts in this situation.
Sri Lanka recently upgraded from a low-income country to a middle-income country. Sri Lanka does not get the concessional loans that low-income countries get. The interest rate of such loans is less than one percent. The repayment period is 25 to 40 years. As a middle-income country, Sri Lanka was forced to take high-interest commercial loans. Sri Lanka now accounts for around 60 percent of such loans. By 2005, such loans were only five percent.
In November 2021, Sri Lanka’s foreign exchange reserves decreased to one billion 1.58 billion US dollars. After that, the countries and organizations left that were considered Sri Lanka’s development partners. Even though a new government has been formed now, Sri Lanka is not in a position to repay its foreign debt installments. Sri Lanka’s economy is in shambles. It seems that it will take several more years to get out of the problems related to foreign exchange.
3. The trap of organic farming
During the election campaign, President Gotabaya Rajapaksa announced that Sri Lanka would be developed as a country with full organic farming within 10 years. After coming to power, a complete ban was imposed on the import of chemical fertilizers and pesticides from April 2019. After this decision, the production of paddy decreased by 20 percent. A country that is self-sufficient in rice has reached a situation where it has to import rice worth about 450 million dollars.
After the agricultural production fell by more than half, there was a shortage of rice and sugar. An artificial shortage was created in the market. As a result, the price of goods started to increase. Certain business and political groups took advantage of this situation. Excess grain was stored. Its impact was seen in the food market. This campaign devastated the entire agricultural sector of Sri Lanka.
Production of tea, rubber, coconut, and spices, which contribute well to Sri Lanka’s exports, also declined. Sri Lanka faced an unexpected crisis when the farming system, which had been using pesticides and chemical fertilizers for a long time, was converted to organic farming. Because the international market for organic products is good, this way was sought for economic prosperity. Due to the government’s unprepared program, the farmers had to be compensated about 300 million dollars for the loss.
4. Tourism in post-Covid after security concerns
In 2019, suicide bombings at churches and hotels in Colombo devastated the tourism industry. These attacks in the capital sent the message to the international community that Sri Lanka is unsafe to visit. Western media also has an important hand behind it. The American media began to broadcast news that the influence of the LTTE was again visible in Sri Lanka. They spread the news internationally that it is unsafe to travel to Sri Lanka. This was their another attempt to collapse the Sri Lanka. The Americans were successful in that. They worked with the idea that after Sri Lanka’s economic weakness, Sri Lanka would leave China and join them.
Sri Lanka’s tourism sector is on the decline and the Covid epidemic, which has put it in an even greater crisis. Due to covid, the income of the tourism sector is zero. As a result, Sri Lanka’s tourism sector, which is on the decline, has come to a halt. Instead of earning foreign currency, the tourism sector has come to expect support from the government. Many investments in the tourism sector also sank during this time. The contribution of the tourism sector to the Sri Lankan economy was above 10 percent. Along with agriculture, the Sri Lankan economy fell into further crisis as this sector also collapsed. In the year 2018, Sri Lanka received 2.3 million tourists and this number has been decreasing in the following years. In 2021, tourist arrivals decreased by 61 percent compared to the previous year. It seems that the income from the tourism sector has decreased by about 26 percent.
5. Impact on remittances
Sri Lanka’s second most important source of foreign exchange was remittances. Remittances account for about 13 percent of the Sri Lankan economy. Sri Lanka used to receive about $7 billion in remittances every year. In 2021, the remittance income decreased by 23 percent compared to the previous year.
Many workers returned to the country due to the Corona epidemic. The rest of the workers also lost their jobs abroad. As a result, they could not send remittances properly. Sri Lanka’s remittances are limited to $5.49 billion in 2021. This is the lowest in the last 10 years. To bring in remittances through official channels, the Sri Lankan government adopted an incentive policy of adding 10 rupees to one dollar at the prevailing exchange rate. This arrangement also did not make any significant progress in remittance flow.
Sri Lanka devalued its currency by about 15 percent to increase its balance of payments. It was expected that this would lead to an increase in remittance inflows as well as increase in exports. This idea of the government also did not work much. As money became cheap, imports became expensive. The trade deficit began to increase. Due to the arbitrary tax concessions given by the government through popular programs, the revenue decreased, and the employees had to print notes to pay their salaries and allowances. Recently, inflation has increased in Sri Lanka. According to data from the Central Bank of Sri Lanka, inflation is currently around 46 percent.
American influence
The long-term investment of the Americans seems to have worked behind the Sri Lankan failure. They wanted to see the present state of Sri Lanka much earlier. In other words, the American desire is to weaken not only Sri Lanka but also other countries in South Asia. It seems that America is working with the idea of using it against China after falling into a trap economically. That is why America’s first focus is on Sri Lanka, Nepal, and Pakistan rather than India. As the Prime Minister, Imran Khan tried to bring Pakistan under the American camp by visiting America. That effort has not been completed yet.
The condition of Nepal is not less than that of Sri Lanka. The Nepali economy has also been going down for the past few months. The Nepali authorities have reached the stage of making any kind of agreement for foreign exchange. MCC is a product of that. America has been unsuccessfully trying to use Nepalese land to surround China. However, the success of America in Nepal seems that day is not far away.
The US has been trying to humiliate Sri Lanka by showing the issue of human rights. Due to China’s help, Sri Lanka was able to suppress the LTTE. However, Sri Lanka failed to implement post-conflict reform programs.
The propaganda war of the western media seems to have worked in the collapse of the tourism sector, which showed potential even in the long-term conflict. While the Western media is promoting Sri Lankan tourism sector as unsafe, it has failed to convey the message that Sri Lanka is a safe destination. However, Sri Lanka fell into this propaganda of the western media.
In 2017, Sri Lanka handed over Hambantota port to China for 99 years. Recently, Sri Lanka withdrew the MCC project advanced by the US. It was the most important decision of Sri Lanka. The issue of the return of the MCC became a topic of debate worldwide for those who raised their voice against the US aid project. With the return of the MCC, America began to put more pressure on Sri Lanka. The pro-American World Bank and International Monetary Fund put more pressure on the Sri Lankans to repay their debts. On the other hand, they were also under great pressure to improve the declining economy.
Even today, Sri Lanka is caught in the middle of crisis. Sri Lanka did not change its old thinking of not taking assistance from the IMF even when the country lacked essential commodities. The government appealed to China and India for economic rescue. India provided loan assistance of $1.5 billion to purchase essential commodities and fuel. China provided financial assistance worth 2.5 billion dollars. After this assistance, the IMF and the World Bank helped Sri Lanka. Amidst the crisis, the American game has started again in Sri Lanka.
