- Larisa Micu
What’s up with the economic crisis in Sri Lanka?
What’s up with the economic state that Sri Lanka’s in? Due to the country’s flawed economic model that overly relies on the International Monetary Fund and other Asian creditors such as China and India for bail out, the country is in massive debt in the billions and has thus gone bankrupt. The previous Sri Lankan government has managed to attract foreign investment into the country, which boosted its domestic economic growth, but at the expense of deepening imbalances on the balance of payments. According to the BBC, exports did continue to rise from ‘2000 to 2018, from $6.5bn to $19.4bn’ and yet ‘over the same period of time they slumped as a share of the economy, from 39% to 23%’. On top of that, Sri Lanks’s trade deficit stands at just over 6% of GDP, a figure worthy of concern. It is mainly the imbalance of payments previously mentioned that caused the country’s bankruptcy, as it very suddenly realised it lacks the foreign currency necessary to import the country’s key supply of food and fuel without which its people cannot live. Sri Lanka’s current president, Ranil Wickremesinghe stated that the road to the country’s economic recovery is to be a tumultuous one that needs to be started by driving up exports in an attempt at achieving a better figure on the balance of payments. His ambitious attempt at turning Sri Lanka into a ‘competitive export-oriented economy’ might just be the political attitude needed to solve its troubled economy, granted that it works. Seeing as Sri Lanka is a popular tourist destination due to its tropical climate, and the fact that it is financially reliant, or rather dependent on tourism, it is obvious to deduce the economic carnage that Covid caused once travel restrictions were imposed. The government’s irresponsible financial reliance on foreign creditors and the tourism industry is what caused the country to be in such a slump.
Outside the political sphere, it is ultimately the Sri Lankan people who suffer the most, as food prices have gone up so high that families can’t afford to feed their children, and in the case of larger families, the parents can’t afford to send all of their children to school. In the country’s export industry, which the president is now putting all of his faith in to save the economy, things aren’t looking so grand either. Sri Lanka’s main export is tea leaves, and has been this way since the British colonised the island. The problem arose when tea farmers found themselves stranded by the ban on the importation of fertilisers that were needed for their plantations, causing the production to plummet significantly. Not only this, but the government foolishly relies on the export of an industry that refuses to modernise, with workers still picking tea leaves by hand and using outdated machinery which greatly reduces the amount of finite product they can supply to other countries.
So why isn’t this spoken about more widely in the media? The short answer is that Western media chooses not to focus on ‘small’ issues, i.e. the struggles of third world countries in Asia. With other incendiary news that are of worldwide interest, such as the Russia-Ukraine war that has recently reached a year since the first Russian attacks on Ukraine took place, news such as Sri Lanka’s economic struggle didn’t make it into mainstream attention, hence once again making people in third world countries feel like they are alone in their struggle.