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After months of deep economic and social crisis, Sri Lanka began to enter a “power vacuum”.
Although there are still some protesters strolling and taking selfies in the presidential residence, the streets of Colombo yesterday have calmed down. The president and the prime minister announced their resignations one after another, and even the military came forward in a timely manner, which was considered to have played an important role in calming the situation.
However, the scenes of the sudden change of the situation on the 9th were also widely spread in the international media yesterday. How Sri Lanka, with the “national bankruptcy” superimposed with a serious political crisis, can get out of trouble is still a huge question mark to be solved.
Sri Lanka, once a middle – and high-income country in South Asia, has fallen into the current dilemma, which has aroused widespread reflection. However, the relevant factors leading to the current economic and social crisis in Sri Lanka also exist in some other countries more or less.
Another question mark and more worrying problem is that Sri Lanka may not be the last “bankrupt” country. So, who might be next?
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Sri Lanka has experienced another wave of protests since the outbreak of the domestic crisis.
On the morning of the 10th, a few hours after President Rajapaksa and Prime Minister viklamasingha announced their resignations or their willingness to resign last night, the national defense staff shaavandra Silva issued a brief statement, stressing that the opportunity to resolve the current political crisis by peaceful means had emerged, and calling on the Sri Lankan people to support the armed forces and police to ensure the maintenance of national peace.
The military statement and the president’s resignation obviously played a certain role in calming the situation. Local media reported that the streets of Colombo were basically calm yesterday. However, in the international media, the scenes of Colombo’s sharp decline on the 9th are vivid.
The passionate demonstrators began to rally and March that morning. Around 1:00 p.m., a large number of demonstrators holding high the Sri Lankan flag and even wearing helmets broke into the presidential palace. They stood on the roof and walked around the presidential palace, lying in bed and swimming in the swimming pool. Similar images spread across social networks. It is said that until yesterday, some people were still hanging around the presidential residence, busy taking selfies.
Then, around 2 p.m. on the 9th, the presidential Secretariat and the Ministry of finance, located by the sea, were also hit. The private residence of the prime minister was also set on fire.
Sri Lankan media reported that tens of thousands of demonstrators were on the day, and the presidential palace and the Secretariat were guarded by security personnel, but they failed to stop the demonstrators. More than 30 people were injured in the day’s protest, but the protesters who shouted anti presidential slogans did not see Rajapaksa that day.
BBC and other media speculated on the whereabouts of the president of Sri Lanka, quoting some unconfirmed news that he went to the airport after the incident and was “ready to leave at any time”. Others said that he was near the Colombo port, “someone saw two ships parked in the port, and some suitcases were carried on board”.
However, sources from Sri Lanka’s Ministry of Defense said that after learning about the protesters’ plans on Saturday, the president had been evacuated to a safe place in advance. The prime minister, who was still convening an emergency meeting of party leaders on the afternoon of the incident, also moved to a safe place.
According to Rajapaksa’s notice to Sri Lankan speaker abewadna, he will resign as president in three days. However, Sri Lanka has actually entered a political power vacuum after Prime Minister Vikram masinha also expressed his willingness to resign, and a number of Ministers including the Ministry of investment promotion and the Ministry of Agriculture announced their resignations one after another.
As early as the day before the sudden escalation of the situation on September 9, the US ambassador to Sri Lanka, Zheng Zhiyun, called on the military and police on Twitter to “provide space and security for peaceful demonstrations” for the demonstrators. On the 10th, the spokesman of the US State Department also made a statement on the situation in Sri Lanka, criticizing the violence of the demonstrators, but also warned the Sri Lankan military “not to attack protesters and journalists”, and asked Sri Lankan politicians to “act quickly” to find a solution.
Western media that reported the US statement mostly mentioned that the relationship between Rajapaksa and the United States has been “unstable”, because he denied the allegations of war crimes in Sri Lanka’s civil war, and Sri Lanka and China established “close economic and trade cooperation” during his administration.
The International Monetary Fund, which is negotiating with Sri Lanka on the rescue funds, also expressed concern about the development of the situation and expressed the hope that the political crisis in Sri Lanka would be resolved as soon as possible, so as to resume the dialogue on the relevant plans supported by the IMF.
On July 6, Prime Minister Viktor masinha said he hoped to submit a report on debt restructuring and sustainable development to the IMF before August. “Once an agreement is reached, the IMF will formulate a four-year comprehensive loan assistance plan,” he said.
But now the political situation in Sri Lanka has changed dramatically, and there are questions about when and who will promote this plan.
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More than three months ago, Sri Lanka had experienced a round of major social unrest.
At that time, demonstrations spread from Colombo to many cities, and protesters demanded that President Rajapaksa resign immediately.
At the end of April and the beginning of May, Sri Lanka broke out two national strikes in succession.
During this period, civil unrest continued in Sri Lanka, and the government sought help from the outside and implemented policies at home, but with little effect. The inflation rate in June reached 54.6%, a new high.
Seeing that Sri Lanka’s economy continues to fall. So that on July 6, Sri Lankan Prime Minister Viktor masinha announced that “the country has gone bankrupt”, and he believed that this unprecedented economic crisis “will continue until at least the end of 2023”.
The transmission chain from “national bankruptcy” to the serious impact on people’s lives is quite fast.
The country’s foreign exchange has dried up, and there is no money to buy fuel that has skyrocketed due to the conflict between Russia and Ukraine. Domestic fuel reserves are basically exhausted, and the fuel shortage crisis continues. In order to save fuel, Colombo has asked that it is unnecessary not to go to work, just work at home, and the school will continue to be closed.
Sri Lankan people have been living a de facto “closed city” life because of the lack of fuel.
Besides, not to mention whether there is money to buy oil, it also needs enough patience to queue up to refuel.
Outside the gas station, there are often many sudden cars and motorcycles, which are forced by life and must be refueled. A driver said, “I’ve been waiting here for three days, but I can’t leave. I can only sleep in the car at night. I hope the gasoline can arrive tomorrow.”
Sri Lanka is facing the worst economic crisis since independence from Britain in 1948.
People’s livelihood prices have soared, and daily necessities are both scarce and expensive.
For example, a few months ago, the price of four rolls of toilet paper was 590 Sri Lankan rupees, about 10 yuan. Now it has risen to about 20 yuan.
The bigger problem is that when everything is more expensive, it is fortunate that wages have not fallen in nominal terms.
However, it cannot stand the sharp depreciation of Sri Lanka’s currency.
For example, the monthly salary of a senior policeman in Colombo used to be 100000 rupees, which was about 3000 yuan at that time. It is still this income, but it is less than 2000 yuan.
With the rise of prices and the depreciation of wages, it is conceivable that Sri Lankan people are suffering.
What is more frightening is that there is no momentum to ease all this. “The situation is very serious, and we may face a situation similar to famine in 2-3 months.” Sri Lankan economist kadijamal said.
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When talking about the Persian rivanka crisis, most of the analysis attributed it to the COVID-19, the conflict between Russia and Ukraine, the rupture of the global supply chain, soaring energy prices, the Federal Reserve’s continuous interest rate hike, etc., resulting in a heavy blow to Sri Lanka’s tourism industry, a sharp decline in overseas remittance income, and the depression of OEM enterprises.
In fact, these are only incentives. The deeper reason lies in Sri Lanka’s high external debt and long-term trade and current account deficit. It is a typical “double deficit country”.
Sri Lanka has not been in debt for a day or two.
Its external debt and debt service ratio have remained high since 2013. In 2018, the three major international rating agencies rated Sri Lanka as B2 or B, believing that the country’s solvency is weak. Once there are economic and political problems or external shocks, there will be a high risk of foreign debt default.
Just like the fragile seedlings, how can they withstand a little wind and rain, not to mention the superposition of the conflict between Russia and Ukraine and the epidemic, resulting in violent storms.
According to the analysis of Sri Lanka’s official external debt data, from the perspective of the expected principal and interest repayment arrangement of external debt issued by the Ministry of external resources, Sri Lanka will usher in two peak periods of external debt repayment in 2019-2022 and 2025-2027, especially in the first stage, Sri Lanka will repay up to US $15.139 billion in debt principal and interest within four years.
To some extent, it can be said that the crisis in Sri Lanka will come sooner or later.
In 2009, Sri Lanka ended its 26 year civil war. In less than 10 years, Sri Lanka has become a middle – and high-income country in South Asia.
The short economic boom temporarily covered up the weakness of poor management.
Sri Lanka has long faced external economic imbalances. Foreign exchange income mainly comes from exports, remittances from overseas Chinese and tourism. Such export structure is vulnerable to changes in the international environment. With the widening trade deficit, the depression of tourism and the reduction of remittances, Sri Lanka’s foreign exchange reserves continued to decline. At the end of March this year, Sri Lanka’s foreign exchange reserves were only $1.9 billion.
Foreign debt is also trapped in a vicious circle.
In the post-war reconstruction of Sri Lanka, most of the external debt flows to the field of infrastructure construction as investment, and this field cannot achieve economic returns in the short term. This led Sri Lanka to fall into a vicious circle of borrowing new debt to repay old debt.
The problem is that Sri Lanka, which has been unable to make ends meet for a long time, is difficult to borrow preferential loans with long repayment time and low interest rates in the international market. The proportion of commercial loans from short-term financing and high interest rates is gradually increasing.
Some experts said that Sri Lanka’s economic crisis reflected the mismatch between the country’s development strategy and development capacity, and the mismatch between its long-term goals and the reality. In the final analysis, some elites’ ideas are seriously divorced from reality.
What is more worrying is that Sri Lanka is probably not the only case of “national bankruptcy”.
If a country now has a high external debt ratio, a rapid currency depreciation, and a high dependence on imports of energy and food, they are likely to follow Sri Lanka in the wake of a major crisis.
At present, Turkey, Argentina, Brazil and other countries are facing such risks.