Rajapaksa is losing his political capital while dealing with the economic crisis
Rajapaksa is losing his political capital while dealing with the economic crisis
Sri Lanka is grappling with unrest over severe economic crisisMade the inevitable by contacting the International Monetary Fund (IMF) for a bailout program. All eyes now on Sri Lanka-IMF meeting This week in Washington DC. According to Finance Minister Ali Sabri, Sri Lanka needs $3 billion in six months to restore the supply of essential commodities. The island nation has been talking to other countries as well. In mid-March, India signed a $1 billion bilateral credit facility agreement, under which 16,000 tonnes of rice has been supplied. The steps being taken by the Central Bank of Sri Lanka (CBSL) are aimed at stabilizing the devastated economy. On 12 April, the central bank made a difficult “last resort” decision to go into A pre-emptive default on all of its foreign debt of $51 billion, It also affected the 7 per cent hike in interest rates.
Though the present situation has not come suddenly, not every ailment of the economy can be attributed to the present regime. Rajapaksa, Economists have described Sri Lanka as a perfect case study of a twin deficit economy: national expenditure in excess of national income, combined with insufficient domestic production of tradable goods and services. 2019 easter sunday attacks And the COVID-19 pandemic subsequently affected key foreign exchange earning sectors as well – tea and apparel exports, tourism and labor remittances. The Russo-Ukraine war is also expected to worsen matters. Still, the Rajapaksa regime cannot completely free itself from taking the country to its current state. Although several experts floated the idea of moving to the IMF two years ago, the central bank in its annual report for 2020 (which became available at the end of April 2021) projected the country’s economy to contract at 3.6% in real terms. 2020 as “deepest recession since independence” [in 1948]The government’s response has been inane. Apart from the demand to reduce imports of a variety of goods, its response has been extremely disappointing. Even the move to ban chemical fertilizers had to be withdrawn later. After coming to power, the crisis has also been exacerbated by the president’s short-sighted decision to “cut the gift tax” in late 2019, a move that affected the ratio of government revenue to GDP – from 12.6% in 2019 to 9.1% in 2020. till. For the people, the protests in Colombo reflect their realization that the regime they brought in was virtually ignorant of economic problems. The only saving grace for the Government has been the selection of competent experts as the Governor of CBSL including P. Nandlal Veerasinghe to guide the economic matters. Despite the long run of the movement in Colombo and elsewhere, and the ability to escape the political maneuverings of the Rajapaksa regime, it is clear that it no longer enjoys the trust of many sections of society. But Rajapaksa cannot allow the crisis to deepen as he is trying to save his political image. The country needs to be put on the path of economic reforms without any delay.