Sri Lanka’s Economic, Political & Human Crisis

Sri Lanka’s Economic, Political & Human Crisis

Dr Lionel Bopage

Ayubowan, Vanakkam, As-salamu alaykum, Greetings to all! Fellow panellists and friends.

I acknowledge the Traditional Owners of this land, the Wurundjeri People of the Kulin nation and pay my respects to their Elders, past and present. Sri Lankans are battling their worst economic crisis since independence. The lack of foreign exchange to procure vital imports has triggered island-wide anti-government protests. The crisis has devastated people’s lives. A broad-based, but dispersed and inclusive popular movement with no central leadership has taken the central stage. This protest against autocratic rule is a welcome change in a land where the people had been traditionally fractured along caste, ethnic, linguistic and religious lines. The situation is volatile in all fronts. Like in the past, authorities could use this turmoil to justify violent repression that could lead to a fourth massive bloodbath in the country.

The initial economic shock for the current crisis was generated by the 2019 Easter bomb attacks. Those attacks led to a sharp decline in tourism and strained foreign exchange reserves. The Rajapaksa regime made the crisis worse through cuts to taxes collected from a small base. This alone cost hundreds of billions of Rupees to the government coffers. Revenue was severely curtailed, while the mounting debt remained. The next trigger for the crisis was the COVID pandemic and the war in Ukraine. The foreign exchange derived from tourism, exports and remittances came to a shuddering halt. Foreign direct investment also stopped.

The President unilaterally imposed a ban on all fertiliser imports and ordered farmers to switch overnight to total organic farming. This was due to a lack of foreign exchange for importing fertiliser. Productivity of tea and rubber fell and the export income also dropped. Total agricultural production declined to alarming levels. It triggered more imports. Sri Lanka has to pay US$ 6 billion every year primarily for the international sovereign bonds, and also for the other loans taken since 2007 from the Chinese, the Japanese and the World Bank, the Asian Development Bank and so on. The global crisis is growing and the global interest rates are going up. With the US dollar strengthening, the debt burden will grow even worse. However, the country does not have any means to pay. Experts warned about this growing crisis several years ago. No one in power paid any attention.

Sri Lanka is heavily dependent on imports. The lack of foreign exchange generated a catastrophic shortage of food, fuel, medicine, cooking gas and other essentials. The country is also facing a major rupee shortage. The government is unable to pay its employees and to run its day to day operations. The government’s response has been to print more money, and that has led to accelerating inflation. Now the inflation rate has reached almost 50 per cent.

The economic burden was first felt by teachers and peasants who started protests island-wide. Thus, the economic crisis turned into a political crisis. When the urban affluent middle classes felt the lack of essential items and the effects of long power cuts, they came out onto the streets. They expressed their growing frustration and anger through ad hoc protests and nightly vigils in middle-class neighbourhoods. The first slogan #GotaGoHome came from them. Later they mobilised and formed Gota Go Gama at Galle Face Green. When more and more people became aware of the financial and economic mismanagement, the protest movement gained momentum island-wide.

With hundreds of thousands of people from different political, racial, religious, and social backgrounds participating, the large-scale inclusive social mobilisation continued. Workers in cities and Malaiyaha workers in the plantations also went on strike. Tamil speaking people in the north and east also took part, but not in a major way, mostly due to understandable reasons. The Rajapaksa regime labelled the protesters as extremists. The police shot at peaceful protestors killing one and wounding many more.

Popular anger grew as the President refused to accept any responsibility for the growing crisis. Next, the regime planned attacks on centres of peaceful protests, particularly in Colombo and Kandy. However, the ordinary people came forward and defended the protest movement. This situation led to several spontaneous counterattacks as well as some hitherto unidentified organised violence in certain areas that led to arson and caused several deaths. Hundreds of lawyers have voluntarily mobilised for representing the interests of protesters.

I like to emphasise two matters. Firstly, the protest movement had been peaceful and still remains so. This has to be acknowledged and appreciated. Secondly, when the regime understood that state terror could not break down the protest movement, the Rajapaksas resorted to using more violence. The main demand of the protestors has been the resignation of the President, the Prime Minister, and the government. The Prime Minister, the cabinet and some top-level bureaucrats resigned as a result.

However, the President and the government have survived. Currently, nothing appears to be on the table to addressing the key demands of the protest movement such as the President’s departure, repealing the 20A, abolition of the executive presidency and so on. Instead, the President has acquired further 42 institutions for the Ministry of Defence.

The overwhelming responsibility of the crisis lies with the ruling elite and their acolytes and senior bureaucrats who enabled the political elite to usurp the wealth and resources of the country. The president appointed Mr Ranil Wickremesinghe as the new Prime Minister. Mr Wickremesinghe had been the Prime Minister five times before and was ineffective! Meanwhile, the political crisis continues. Irrespective of who is in power and their political colours, the financial markets will demand their pound of flesh.

Sri Lanka is in the process of acquiring the 17th loan from the International Monetary Fund (IMF). The IMF has outlined a series of austerity measures as a pre-condition for providing their assistance package. The government has already embarked on the process of adopting some of those measures. Yet there is no guarantee that it would lead to a long term economic recovery. What are the advantages Sri Lanka has gained from the previous 16 IMF assistance packages and from many other assistance programs provided by several international agencies? The ultimate outcome is visible right now in front of our eyes: an accelerated debt build-up. So, can we expect the 17th IMF assistance package to solve the current crisis?

The regime as well as the international creditors appear to be conveniently blind with regard to the illegal siphoning of funds by those in power and wastage of resources in the state sector. They are silent on the government spending almost half of its salary bill on the military (excluding the Police)! Direct allocations to the three armed forces covering both recurrent and capital expenditure are LKR 308 billion with 12.3 per cent of the Finance Appropriation Bill for the year 2022 allocated to the Ministry of Defence. This represents a 1.74 per cent increase in direct military expenditure for the year. In fact, the government increased defence spending after the Covid pandemic while the health budget was cut! Tens of thousands of able-bodied people in the public service are not employed productively. If financial mismanagement and corruption cannot be curtailed, large scale foreign investment cannot be expected to occur.

The closest example of the damage the neoliberal solutions have done to the economy of a country can be observed in Pakistan. In the year 2019, the IMF provided Pakistan with a $6 billion assistance package. However, the previous regime in Pakistan did not address the structural issues that were causing the crisis. The expected long-term positive economic outcomes did not materialise. The new regime in Pakistan is now negotiating another assistance package worth $ 8 billion. So, without system change, what can we expect from a negotiated IMF assistance package?

Recovery will be further hampered by global developments due to rising inflation, particularly rising prices of fuel and food, our main imports. Though people are not responsible for this crisis, the IMF’s approach will impose a solution at the expense of the people’s living standards. What can be expected is more resistance and more repression!

The repercussions of the crisis will very much depend on whether we choose to address the symptoms or the causes of this crisis. Broad emphasis on the necessity for collective action and solidarity at all levels of society and the economy will be vital. This is a progressive task that the protest movement itself can undertake through the discursive spaces they have already created.

However, the more established centralised ‘left’ groups are competing with each other, just to expand their influence, safeguard their sectarian political interests and bring the protest movement under their direct control. The extremes of their competing agendas such as acquiring a quick election victory or establishing “People’s Councils” island-wide appear to be simply “pipe dreams” in the current context. Furthermore, the protest movement does not yet appear to have either a concrete set of common demands, an agreed program of action, or a collaborative team leadership for achieving its objectives.

For Sri Lanka to become stable, establishing a new interim council was proposed by many groups including some in the diaspora. Such an interim council needed to have the protest movement also represented in it. With a semblance of stability, parliamentary elections could be held during a prescribed period, with a view to developing necessary and sufficient conditions for formalising ‘system change’ through an elected constitutional assembly, which could, in turn, develop a people-centred constitution. To achieve this the protest movement needs to strengthen, expand and encompass all sectors of the Sri Lankan society, led by those who create the wealth of the nation, not those who siphon it off.

Thank you.

*Speech Dr Bopage made at the Darebin Intercultural Centre in Preston, Victoria on 5th June 2022

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COMMENT

A very good analysis of the present economic and political crisis. However, he has listed the symptoms of the disease and not its root cause/causes.

After independence in 1948, the Sinhalese political leaders of all hues have divided the people on the basis of race and religion. They deftly played the race and religion to capture power and remain in power. DS. Senanayake, the so-called father of the nation, stripped 800,000 thousand Hill country Tamils, first, their citizenship in 1948 followed up with franchise rights in the following year. These people were wretched of the earth and the worst exploited working-class people confined to one room cooly lines. They remain so even now without any significant change in their lifestyle.

DS Senanayake was also the Sinhala nationalist leader credited with state-sponsored colonization of the eastern province with Sinhalese. sponsored Sinhala colonization. Today the Tamils in the eastern province have been reduced to a minority thanks to Galoya, Allai and Kantalai colonization schemes.

Then came the Sinhala Only Act enacted by Oxford-educated SWRD Bandaranaike. This single Act contributed to the great divide between the Sinhalese and Tamils. More came in the form of standardization that blocked the entry of Tamil students to universities.

In 1972, Mrs Sirimovo Bandaranayake introduced the unitary constitution and gave Buddhism the foremost place at the expense of other religions.

The Sinhalese people were told that their prosperity depends solely on depriving and subjugating the Tamils. The series of communal riots that commenced in 1956 was meant to destroy the economic base of the Tamils. But in the process, the country’s economy too was ruined.

The 30-year war that followed was a response to Sinhalese state terrorism. It is the Sinhalese racist politicians who created Prabhakaran.

What Sri Lanka needs today is a statesman like the late Lee Kuan Yew, Prime Minister of Singapore. This visionary leader laid the foundation in tuning a fishing village of few thousand into a modern economic powerhouse. Despite the fact, that Chinese constitute 75% of the population he made Chinese, Malay, Tamil and English official languages. Only 5% of the population speaks Tamil. The national anthem of Singapore is not Chinese, it is Malay.

Singapore is a city-state with hardly any natural resources. It imports water from Malaysia!

The GDP of Singapore is USD 340 billion. Its per capita income is USD 58,056 in 2020. The GDP per Capita is equivalent to 460 per cent of the world’s average. (source: World Bank).

In comparison, Sri Lanka’s GDP is USD 81 billion (2021) and its per capita income is USD 4.052 (2020). Is it a small wonder Sri Lanka is bankrupt and going with a begging bowl for loans as little as USD 50 million?

Sri Lanka can only be salvaged by enacting an inclusive constitution based on democracy, secularism, socialism and equality. Every citizen must feel proud of his country, the flag and the national army. Sadly, this is not the case now. Tamil anthem was dispensed under President Gotabaya Rajapaksa.

Canadian expatriate Tamils alone can bail out Sri Lanka if a core set of fundamentals are put in place. The system should be changed not the actors.

Though the LTTE has been defeated the causes that led to the war still remain unaddressed.

As I finish, news comes the Navy in Mullaithivu district is trying to acquire permanently 617 acres of land belonging to Tamil families. Though the war was over 13 years ago, it is not over yet for the Sri Lankan Navy! (Thanga)