Driven by economic and political crises, Sri Lanka at a standstill

Heavily indebted, Sri Lanka can no longer import hydrocarbons and has been completely at a standstill since Sunday, for lack of gasoline. In addition to shortages of essential goods, including food and medicine, there are also incessant power cuts. A situation aggravated by the war in Ukraine, but which is actually due to several decades of bad governance, especially fiscal. It is the worst crisis the country has gone through since its independence in 1948, and it has just reached new heights. Due to a lack of fuel, Sri Lanka is now completely at a standstill. slightly below the usual level of one-day consumption – an announcement which caused the stoppage of public transport. A shortage that comes on top of those of essential goods, including food and medicine, long daily power cuts and record inflation in a context of serious political crisis. If the situation is long before the war in Ukraine, the politico-social crisis in Sri Lanka did indeed accelerate last April with the explosion of energy prices linked to the invasion of Ukraine by Russia. In June, inflation in Sri Lanka has thus passed the symbolic threshold of 50%. Food prices jumped by almost 60% compared to the previous year. So much so that for the middle class, vegetables like cabbage, cauliflower and carrots are now seen as luxury foods. The shortage of foreign currency no longer allows the country to import enough food, fuels and other essentials. “There are oil tankers waiting in the harbor in front of Colombo. The problem is that there is nothing to pay them, because the government has no more foreign currency”, supports Éric Paul Meyer , historian specializing in Sri Lanka. Also, unable to repay its foreign debt of 51 billion dollars (nearly 49 billion euros), the Sri Lankan government declared itself in default of payment in April and is currently negotiating with the Fund international monetary policy for a possible bailout. “There have already been periods of intense shortages, especially in the 1970s”, relates the historian, professor emeritus at Inalco. “But such a brutal and violent shortage is completely new.” Deep rootsSri Lanka’s crisis took a turn last year with President Gotabaya Rajapaksa’s abrupt decision to ban all chemical fertilizers , pesticides, herbicides and fungicides in order to make the country the world’s first 100% organic. limiting imports. But in an economy where the agricultural sector employs between a quarter and a third of the national workforce, such a measure has had devastating effects. Drop in yields, closure of plantations, job losses, food shortages… “To the revolt of the agricultural world faced with falling yields was added that of the working classes forced to queue to get their food, and at prices soaring”, explains Jean-Joseph Boillot, associate researcher at Iris, a specialist in major emerging countries, particularly India. “The result was the triggering of a well-known vicious circle: brutal inflation, loss of confidence, currency crisis, capital outflow and therefore budgetary and balance of payments crisis leading to a debt crisis. “But for Éric Paul Meyer, the Sri Lankan economy was weakened from the 1980s. “The country abandoned the foundations of its plantation economy to turn to tourism, but also income from immigration, the garment industry, and the global market,” he explains. An element of weakness aggravated, he says, by the civil war (1983-2009) between the Tamil minority and the Sinhalese Buddhist majority. sought to increase its presence on world markets, and there was no search for a new form of economic development. collapse of tourism, the Covid-19 crisis and, adds Éric Paul Meyer, “a series of rather monumental errors in tax governance which have made things worse over the past 15 years”. Crony capitalism and corruptionLa Rajapaksa family has ruled Sri Lanka for much of the past two decades. Mahinda Rajapaksa, the current president’s brother, served as head of state from 2005 to 2015. The clan enjoyed deep support among much of the population for ending, to a decades-long civil war in 2009, according to supporters. budgetary revenues linked to tax gifts made to those close to power and the deep anchoring of a crony capitalism – a capitalist economy where success in business depends on close relations with government representatives – within power.>> To read also: “Splendour and fall of a political dynasty in a Sri Lanka on its knees” “There is a lot of corruption, and there has also been a lot of inconsistency in the way the government has managed its budget”, explains Éric Paul Meyer, also referring to the electoral promises in terms of era of taxation. During the November 2019 elections, Gotabaya Rajapaksa pledged to implement drastic tax cuts – removing seven taxes and lowering the VAT rate from 15% to 8%. Populist measures adopted, as promised, after his victory, while the country was benefiting from a four-year IMF loan. slow to appear, manifesting itself in considerable inflation, an attack on the financial markets and the vertiginous fall of the Sri Lankan rupee, which lost more than half of its value in two months. External debt now exceeds 70% of GDP. And the latest ADB (Asian Development Bank) forecasts for 2022 give a continuation of the recession around -2.4%. Demonstrations but “no real insurrection” Can this crisis of internal governance lead to at the end of the Rajapaksa dynasty? “There is enormous discontent in the country, but which is not organized by the political parties”, explains Éric Paul Meyer. For the historian, this movement is comparable to the Hirak in Algeria. Opposed to the maintenance in power of Abdelaziz Bouteflika and his regime, Hirak demonstrated its rejection of corruption and demanded a democratic political transition breaking with the “system”. As in Algeria from 2019 to 2021, demonstrations have been punctuating the life of Sri Lankans who, from all generations and social classes, take to the streets to protest against the shortage of petrol, the rise in the price of rice and foodstuffs, and to demand the departure of President Rajapaksa.”The president has changed of government, but this government is far from being popular and from having the keys to solving the problem”, believes Éric Paul Meyer. However, despite a catastrophic situation, there is, for the moment, no real insurrection within society, he adds. And in any case, recalls for his part Jean-Joseph Boillot, “we know that a capacity for revolt does not necessarily translate into a capacity for an alternative to power”.