Sri Lanka’s fury: The Hindu editorial on the island nation’s economic crisis

as irritable Protesters gather near President Gotabaya Rajapaksa’s house In a desperate bid to expose their suffering, The worsening economic crisis in Sri Lanka has reached its peak. Rajapaksa, who dominates the political and electoral landscape, faces an unprecedented decline in his popularity, as people struggle for enough money, fuel and food. The roots of the crisis may not be entirely rooted in the policies of Mr Gotabaya, who came to power as president in 2019 on a platform of strong leadership and decisive action, while his party, Sri Lanka Podujana Peramuna, won a landslide. A year after the parliamentary election, Rajapaksa inherited some economic problems, while the pandemic burdened him more. However, the current administration is actually responsible for some ill-advised populist measures such as a massive increase in income tax and VAT registration limits, leading to revenue loss. And there was a questionable order to move to fertilizer-free farming overnight, which has led to yield losses and sharp criticism. The chemical fertilizer ban has been withdrawn, but its impact on food security remains. Yet, more than anything, people have a perception of government indifference to their plight, a denial of the existence of the crisis, and the absence of a road map for economic recovery.

It may be easy to summarize the factors behind the crisis as excessive borrowing at high interest rates and a ‘Chinese debt trap’. However, behind this lies a story of economic mismanagement, overuse of public resources and possible mishandling of monetary policy. Sri Lanka, an island nation heavily dependent on imports, receives its foreign exchange through tourism, clothing and tea exports, in addition to outward remittances. If the Easter Sunday blasts of 2019 rattled its tourism sector, the novel coronavirus pandemic nearly brought it to an end. The heavy-handed lockdown, overseen by a military-led task force, also had dire economic consequences, as livelihoods were lost, while earnings fell. The country needs measures to enhance its foreign exchange reserves and balance of payments position. India has given $2.40 billion in aid and China is also considering further loans. The country’s past resistance to borrowing from the IMF may no longer last, and may have to accept significant conditions for a bailout package. However, advocating that people tighten their backs and suffer a little more may not work. The president must acknowledge both the depth of the crisis and the growing disillusionment of the public. What his country needs is empathetic leadership and decisive measures to stop the downward spiral.