Severe Economic Crisis in Sri Lanka

Protests have erupted in Sri Lanka as country reels under severe economic crisis as prices of essential commodities and fuel are reaching sky high. The country is witnessing long queues at fuel stations and grocery shops, with the Gotabaya Rajapaksa government announcing deployment of military.  According to reports more than three elderly people have dropped dead at fuel queues.

The current economic crisis has been fueled by rampant pursuant of neoliberal policies, along with severe repression of dissenting voices, and exacerbated by Coronavirus pandemic. Further the government had turned towards India and China for massive loans for its developmental projects making the country’s economy highly debt ridden. The  current financial crisis has led to critical shortfall of foreign currency, leaving traders unable to finance imports. The post war period in Sri Lanka witnessed a second wave of neoliberalism with the approval by the executive board of the International Monetary Fund (IMF) of US$ 2.6 billion Stand-by Arrangement for Sri Lanka in 2009. This pushed the country’s economy towards privatization and real estate and infrastructure development, requiring major flows of global finances and counted on returns from the tourism sector.

As the crisis deepens and unemployment rate reaching 5.2 %, many Sri Lankans attempted to venture into agriculture. But the lack of state support and sudden ban on importing of chemical fertilizers in 2021 broke the back of agricultural sector in the country. The state sponsored ambitious project of establishing 100 percent organic farming failed severely leaving millions of farmers with failed crops. The Sri Lanka government had to pay $200 million in compensation to the farmers under the botched organic farming scheme.

Facing the biggest economic crisis in a decade, the Rajapaksa government is moving towards cutting down budget for social sector, which will further deteriorate the condition of millions of working-class Sri Lankans. The Rajapaksa government is now seeking a bailout from the International Monetary Fund (IMF), which says the government's foreign debt burden of $51 billion is unsustainable.

With government approaching IMF, the international agency has called for urgent reforms to the island's economy. Such reforms will only exacerbate the current hardship faced by millions of Sri Lankans and further destroy the existing social security net for the people.