Author: Qinghe President wechat official account: zhibenshe (id:zhibenshe0-1)
Editor’s note: in July, Sri Lanka fell into complete chaos. Demonstrators occupied the presidential palace and burned the prime minister’s residence. The president was forced to resign, the government fell, and the country went bankrupt. Sri Lanka has become the first bankrupt country in this round of tightening cycle, which is also in line with the logic of “dual core” impact. Is this just the beginning? This article was published on April 7 this year.
Under the Russo Ukrainian war, the world’s first “Thunderstorm” country has emerged. On April 1 local time, Sri Lanka’s president gothabaya announced that the country would enter a state of public emergency from April 2.
“Sri Lanka has everything except snow”. This island country, known as the “bright and rich land”, is now experiencing the most serious economic crisis since independence in 1948: exchange rate collapse, high inflation, debt thunderstorm. Earlier, Fitch, an international credit rating agency, downgraded the country’s sovereign credit rating to “CC”. Sri Lankan economist muttukrishna sarvananthan admitted: “theoretically, Sri Lanka has gone bankrupt. [1]”
After the terrorist attacks in 2019, Sri Lanka’s economy began to fall into trouble, and then suffered a heavy blow from the COVID-19. This year, the energy crisis caused by the Russian Ukrainian war has become the last straw to crush Sri Lanka. There is not enough foreign exchange to import expensive oil, there is a shortage of domestic fuel, and there is a power outage of more than 10 hours a day. People can only rush to buy wood to make a fire, which is back to the firewood era.
Unfortunately, this economic crisis is triggering a humanitarian crisis. The necessities of life on the island are seriously insufficient, food is in short supply, and prices have soared; In this country with only 22million people, more than 500000 people have been reduced to extreme poverty and face the threat of hunger and malnutrition. People were extremely dissatisfied with the government’s inability to solve the shortage of energy and materials. Protests broke out in many places across the country, and demonstrators demanded that the president and his relatives step down.
With the outbreak of economic crisis, the country is on the verge of bankruptcy, social unrest is spreading, and humanitarian disasters are imminent. This “Pearl of the Indian Ocean” has become a “tear drop of the Indian Ocean”. This year, the global currency has entered an era of tightening. According to historical experience, some countries may encounter debt (currency) crises, and Sri Lanka is only the beginning. In addition, the energy and food crisis caused by the Russia Ukraine war is threatening the survival of the most vulnerable group of people in the world. This will be a severe global humanitarian disaster.
Taking Sri Lanka as an example, this paper analyzes the causes of the national sovereign debt crisis, and pays attention to the most vulnerable people who have been hit by the COVID-19, the war between Russia and Ukraine, and the global energy and food crisis.
Logic of this article
1? Terrorist attacks, COVID-19, oil crisis
2? Government borrowing, central bank interest rate cut, import control
3? Debt restructuring, national restructuring, humanitarian relief
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01
terrorist attack
?
COVID-19
?
oil crisis
Sri Lanka is a country with a very low sense of existence. This island country, shaped like water drops, is called “tears on the Indian Ocean”. Sri Lanka suffered a lot and experienced 25 years of civil war. It was not until the LTTE was eliminated in 2009 that peace was restored in Sri Lanka.
The financial crisis hit the local economy hard in 2008, but the end of the civil war created an opportunity for the country’s economic revitalization. The Sri Lankan government implemented the liberalization policy to attract foreign investment, and the International Monetary Fund provided a loan of US $2.6 billion. The economic growth rate has been above 7% for many years since 2011. However, the industrial base of this country is weak, mainly in agriculture, tourism and clothing, textile and light industry. The local tea is rich, exported to Europe, and the output of black tea ranks first in the world.
This “Pearl of the Indian Ocean” ushered in a golden decade of tourism after the civil war, and tourism has become the main source of foreign exchange for island countries. In 2013, the number of inbound tourists was 1.275 million, with a year-on-year increase of 26.7%, and the tourism revenue was $1.715 billion, with a year-on-year increase of 65.2%. In 2017, the number of inbound tourists increased to 2116400, and the tourism revenue accounted for more than 10% of GDP. Sri Lanka has become a punch in destination for many Indians, Russians and Europeans. This may be Sri Lanka’s best decade. The per capita GDP has risen to the same level as Ukraine, higher than India and Vietnam. The local people are not rich, but their income has increased visibly.
However, all this was broken by the serial terrorist attacks in 2019. At 8:45 a.m. on Sunday, April 21, 2019, the clock on St. Anthony’s Church in Colombo, Sri Lanka, was fixed at this moment. The huge explosion, the blood stains left on the church walls and the frightened crowd on the street tell people that a shocking tragedy is breaking out here.
Before people could react, the local Shangri La Hotel exploded again. Then, there were serial explosions at the cinnamon hotel in Colombo, the Kingsbury Hotel, the Saint Sebastian Church in nigambo and the Saint Sebastian Church in Batticaloa. On that day, three churches, four hotels and residences in Sri Lanka were bombed nine times, killing more than 300 people and injuring 500.
At that time, many people wondered why Sri Lanka was attacked? Sri Lanka’s Ministry of Defense said the explosion was “revenge for the shooting in Christchurch, New Zealand”. From New Zealand to Sri Lanka, terrorist attacks have obviously shifted to “weak countries”. This is a retaliatory act of “controlling the weak with the weak”. Terrorists dare not attack European and American countries, and shift their targets to Asian, African and Latin American countries with insufficient security, targeting hotels and churches gathered by Westerners. Sri Lanka, a new popular tourist destination for Europeans and Americans and vulnerable to defense, has become the target of such terrorist attacks. Among the victims, many nationals from Australia, Britain, Japan, Portugal, the United States and Denmark. Among them, Anders holch povlsen, the richest man in Denmark and the boss of Vero Moda, was attacked and killed in this incident.
This terrorist attack has become a turning point in Sri Lanka, which has hit the economic lifeline of Sri Lanka. Half a year after the terrorist attack, the tourism industry began to recover, and the Russians returned first for the winter. But then, the COVID-19 pandemic hit the tourism industry in Sri Lanka.
“Since the terrorist attack in April 2019, the income of the tourism industry has begun to decline.” Akita kabral, governor of the Central Bank of Sri Lanka, said bluntly, “in the past two years, we have not been able to earn nearly $5billion a year from tourism.”
COVID-19 has pushed the fragile Sri Lankan economy into the abyss. According to the Central Bank of Sri Lanka, the country’s economic growth rate in 2020 was -3.6%. This epidemic has defeated Sri Lanka’s almost only foreign exchange earning industry. As an island country with poor materials, a large number of materials depend on imports; However, the local industrial base is weak, and the energy, industrial supplies and agricultural fertilizers necessary for life are re imported by tourism. However, the COVID-19 has hit the tourism industry hard, with more than 200000 unemployed and nearly $5billion in foreign exchange lost a year.
In the second half of 2021, the travel ban was gradually lifted in Europe and the United States, and the tourism industry in Sri Lanka began to recover. The Sri Lankan government also designated 2022 as the “Sri Lanka Tourism Year”, with the goal of generating $10billion in revenue from tourism by 2025 to rebuild the country’s foreign exchange reserves and sovereign debt.
But the country’s poor fiscal system cannot wait. As early as August 31 last year, Sri Lanka declared a state of emergency due to food shortages as local commercial banks ran out of foreign exchange for imports. By November 2021, Sri Lanka’s foreign exchange reserves had only $1.58 billion left. In the next eight months, the foreign debt of US $1.5 billion will be repaid. This means that Sri Lanka has fallen into an economic crisis, with foreign exchange drying up, currency devaluation, material shortages, high inflation, and sovereign debt on the verge of default.
The outbreak of the war between Russia and Ukraine in 2022 is the last straw to collapse Sri Lanka’s economy. The war triggered an energy crisis, the prices of oil and natural gas rose rapidly, and Sri Lanka’s foreign exchange budget for imported energy was consumed, falling into the original state of oil shortage and power failure. There was no diesel in the gas stations on the island, the transportation system was paralyzed, and a large number of thermal power plants were shut down. 40% of the local electricity comes from hydropower stations, and 60% of the electricity depends on imported coal and oil for power generation. In fact, at the end of March, 37000 tons of diesel oil had arrived at the port of Sri Lanka, but the government, which monopolized energy import, was unable to pay off the purchase price of US $52million.
The shortage of materials has impacted the social order of Sri Lanka. Energy is exhausted, traffic is paralyzed, water and power are cut off, and mobile communication may be interrupted at any time. Due to the sharp rise in the price of paper raw materials, the education department could not afford to buy imported paper and printing ink, and the final examination of nearly 3million students was postponed indefinitely.
The worst is the humanitarian crisis caused by the shortage of food and medicine. Sri Lanka is unable to import food, medicine and other daily necessities, prices have soared, and there are long queues in shops. In March, the inflation rate reached 18.7%, of which the food inflation rate reached 30.2%, and the real inflation rate was much higher than the official statistics. At present, milk powder, bread, rice, vegetables, sugar, rice and other foods are rationed, but food is still not guaranteed. Some hospitals have stopped operations, life-saving drugs have been used up, the medical system has basically collapsed, and more than 200 doctors took to the streets to protest.
The Sri Lankan government said it expected the rice harvest in March this year to decline significantly. Many people find it strange that Sri Lanka, which is in the tropics, should have a large grain output. However, after the outbreak of the war between Russia and Ukraine, the sharp rise in energy prices pushed up the prices of potash fertilizer and other chemical fertilizers. Sri Lanka was unable to import chemical fertilizers, which led to a reduction in grain production.
02
Government borrowing
?
The central bank cut interest rates
?
Import control
This disaster is not only a “natural disaster”, but also a “man-made disaster”. A series of operations of the Sri Lankan government brought the island country into the ditch.
After becoming president of Sri Lanka in 2019, gothabaya changed the monetary and fiscal policies previously provided by the International Monetary Fund, and instead cut interest rates to increase the money supply. Why do you do this? In fact, this practice is no different from Erdogan in Turkey, who are trying to stimulate exports by printing money to obtain dollars.
The terrorist attacks that year hit Sri Lanka’s economy and fiscal revenue. The government of Sri Lanka lowered interest rates to stimulate the economy in response to the maturing government debt. On the one hand, cutting interest rates and printing money can dilute domestic debt, on the other hand, it can also stimulate exports to earn more foreign exchange to repay foreign debt. Trying to reduce interest rates to alleviate the terrorist attack crisis cannot be said to be a big problem.
However, the Sri Lankan government has increased the scale of money printing due to the outbreak of COVID-19. From December 2019 to August 2021, Sri Lanka’s money supply increased by 2.8 trillion rupees, an increase of 42%, and the per capita printing of banknotes was 130000 rupees. Stimulated by low interest rates and currency depreciation, Sri Lanka’s export trade in tea, clothing and other goods increased significantly in the fourth quarter. However, the large-scale printing of banknotes has defeated Sri Lanka’s economic system. The main problems are high inflation, sharp decline in the exchange rate, foreign exchange crisis and foreign debt repayment crisis.
Sri Lanka’s massive printing of money led to currency devaluation and inflation. This robbed the purchasing power of ordinary families, and some people fell into poverty and food crisis. At the same time, large-scale printing of money also defeated the exchange rate market. In March this year alone, the Sri Lankan rupee fell 31% against the US dollar, and now the US dollar is exchanged for 302 Sri Lankan rupees. On the black market, the Sri Lankan rupee depreciated more externally.
The collapse of the foreign exchange market has led to serious consequences, the most direct of which is the increase in the burden of foreign debt and the sharp increase in import costs. Although the currency devaluation policy has stimulated exports and increased foreign exchange earnings, Sri Lanka needs to import a lot of energy and commodities. The devaluation of the Sri Lankan rupee against the US dollar means that the import purchasing power of Sri Lankan residents has been reduced, and the necessities that local people can import are less and more expensive. The devaluation of the Sri Lankan rupee against the US dollar also means that the cost of repaying external debt increases and faces the risk of debt default.
Another operation of the Sri Lankan government is to impose an import ban. In March 2020, Sri Lanka implemented a wide-ranging import ban, which banned the import of a large number of goods, including some food, drugs and automobiles. The import ban exacerbated the shortage of domestic goods and further pushed up prices. In addition, Sri Lanka has vigorously promoted the so-called “green revolution” in agriculture in the name of “going to nature”, with the purpose of banning the import of chemical fertilizers and pesticides. Sri Lanka basically does not produce chemical fertilizers, and chemical fertilizers and pesticides are highly dependent on imports. This import ban directly led to a sharp decline in grain production. Last October, the Sri Lankan government relaxed the ban on chemical fertilizers only after the decline in grain production triggered a food crisis. However, at this time, the currency depreciated and the price of chemical fertilizers rose, and the local farmers were no longer able to import chemical fertilizers.
Many people will wonder why the Sri Lankan government made such a bad decision? The Sri Lankan government aims to save foreign exchange, prohibit people from importing, save foreign exchange, import energy and repay foreign debt. However, this has aggravated the domestic economic disaster.
In addition to the interest rate cut, banknote printing and export ban, the Sri Lankan government also has a long-term problem, that is, the debt remains high.
Sri Lanka has a perennial double deficit in foreign trade and finance. Even in the best decade of the economy, Sri Lanka has a long-term trade deficit. From 2008 to 2017, only the trade balance in 2014 was positive US $8.2 billion, and other years were deficits, with a cumulative deficit of nearly US $50billion. Sri Lanka is still a deficit government. Taking 2017 as an example, with the best economic and financial situation, Sri Lanka’s fiscal revenue was $12.013 billion, fiscal expenditure was $16.877 billion, and fiscal deficit was $3.864 billion.
So, what does Sri Lanka rely on to support the double deficit? Borrowing foreign debt, in short, “debt repayment”.
According to the data of the Central Bank of Sri Lanka, from 2009 to 2017, Sri Lanka’s total external debt increased from US $20.913 billion to US $51.824 billion, and the scale of domestic and foreign debt more than doubled in less than 10 years, with an average annual growth rate of 12% [2]. We can see the debt situation of Sri Lanka through three indicators: debt ratio, external debt ratio and debt repayment ratio.
The debt ratio, that is, the proportion of debt balance in the export income of goods and services, is 100% of the international warning line; Sri Lanka has been above 210% since 2009 and more than 260% after 2015. The external debt ratio, that is, the proportion of the balance of external debt to GDP, is 25% of the international safety line; Sri Lanka has been above 50% since 2009, far higher than the average level of 26% in emerging countries. The debt service ratio and the proportion of the repayment of foreign debt to the export revenue of goods and services are generally considered to be more than 20%, and Sri Lanka has entered the debt crisis since 2013, which has exceeded 20%, and even reached 27% in 2015 [3].
Let’s look at the specific official foreign exchange reserves. From 2009 to 2017, Sri Lanka’s official foreign exchange reserves were less than US $8billion. In 2017, the highest level of foreign exchange reserves, the share of foreign debt that foreign exchange reserves can repay is only 15%. Sri Lanka’s foreign exchange reserves have fallen by 70% in the past two years, and only $2.3 billion remained after currency swaps in February this year. The external debt to be paid this year reached $7billion. Meanwhile, gold reserves have dried up, leaving only US $175.4 million. Without international assistance, Sri Lanka’s sovereign debt default is imminent.
In March this year, the Federal Reserve began to raise interest rates, and the world entered an era of tightening. The Sri Lankan rupee is expected to depreciate against the US dollar, and the sovereign debt burden is even more unbearable. It is likely that Sri Lanka will become the first country to go bankrupt in this round of monetary tightening.
There are two factors in Sri Lanka’s debt problem: first, war debt; Second, fiscal discipline.
During the 25 years of civil war, the Sri Lankan government’s military expenditure continued to increase, and the government relied on large-scale borrowing to maintain unproductive consumption. In 1978, Sri Lanka’s total foreign debt was $1.136 billion, accounting for 40% of GDP that year. By 1989, Sri Lanka’s foreign debt accounted for 73.6% of GDP [4].
After the civil war ended in 2009, the Sri Lankan government tried to revitalize the economy and put forward the “Mahinda vision” to “transform Sri Lanka into an economic center with global strategic significance”. The Rajapaksa government plans to rebuild the infrastructure damaged by the civil war, and vigorously invest in ports, airports, roads, electricity, telecommunications, water supply and irrigation. This is understandable, but the government’s finances are out of control. The long-term civil war has led to the loss of foreign capital in Sri Lanka, and infrastructure investment basically depends on the government’s foreign debt. Sri Lanka’s lax fiscal discipline has led to a debt scale far exceeding its solvency.
When facing the pressure of repayment, the government often takes the action of reducing interest rates, trying to stimulate more foreign exchange through currency depreciation. However, the past turned out to be the opposite. Kabral, governor of the Central Bank of Sri Lanka, argued that “affected by the epidemic, there has been a similar increase in money supply in about 120 countries.” However, in this rotten era, if a country’s money supply is larger than most countries, and its economic strength and solvency are weak, then this operation is undoubtedly suicidal.
In the thunderstorm history of emerging countries, there is an experience that countries with out of control currencies and debts are most likely to break out of crisis in the tightening cycle, and it is the currency crisis and debt crisis that break out at the same time.
In fact, it is common for emerging countries to lose control of their currencies during the easing cycle. M2 data from December 2009 to December 2021: China has increased by 3.9 times, Turkey by 10 times, the United States by only 2.5 times, and Japan by 1.5 times.
Why does the Federal Reserve release water, but the increase in the total amount of money in the United States is not large? The total amount of money is mainly created by commercial banks, while the commercial banks in the United States are private banks, and the interest rate market is a free market. Free prices can inhibit the runaway credit of commercial banks, thereby reducing the money supply. However, many emerging countries do not have such market conditions.
Therefore, once the currency issuance is out of control, when the world enters the tightening cycle, the domestic exchange rate will fall, and the cost of repaying foreign debt will increase significantly. Finally, the exchange rate collapse and debt thunderstorm will occur at the same time. The Latin American sovereign debt crisis in 1982 and the Russian sovereign debt crisis in 1998 all belong to this situation. Today, Sri Lanka is also facing such a disaster.
Many people blame the Federal Reserve, financial openness and commercial banks for the debt storm in emerging countries. In fact, the key is to look at emerging countries themselves. As an island country, such as Singapore, the local resources are scarce, and a large number of resources and commodities depend on imports. Opening up and integrating into the international market is almost the only development path. Import is a kind of exchange, which ostensibly depends on US dollars and foreign exchange. In essence, it is the international competitiveness of domestic goods. We can look at a real case. A few years ago, the Sri Lankan government owed $251million for importing Iranian oil, but now there is no repayment in dollars. What should I do? The Sri Lankan government hopes to provide Iran with $5million worth of Ceylon black tea every month to pay off its debt. This is a barter design, taking away the dollar factor. The success of this deal depends on whether Iran is willing to accept Ceylon black tea.
In the international market, the comparative advantage of resource endowment is limited, and the advantage with lasting competitiveness is the internal comparative advantage, that is, knowledge, system and technological innovation. Apart from tourism, Sri Lanka does not have many commodities that can be sold on the international market. However, the biggest constraint on the international competitiveness of a country’s goods is often its system and policies, which restrict and attack the people’s free play of their talents.
03
Debt restructuring
National reorganization
?
Humanitarian relief
Generally speaking, Sri Lanka’s external debt is not large. Even if the impact of default on other countries is limited, the international community is more concerned about the humanitarian crisis.
The former deputy governor of the Central Bank of Sri Lanka, vijawadna, warned: “when the economic crisis deepens to the point of hopelessness, the country will inevitably have a financial crisis. Both will lead to a reduction in food production and the inability to import due to foreign exchange shortages, thus threatening food security. At that time, this will be a humanitarian crisis.”
Some economists suggested that creditor countries and the Sri Lankan government should start the debt restructuring plan as soon as possible, suspend debt repayment, and use the saved foreign exchange to import the food, medicine and fuel urgently needed by the people. Sri Lanka economist Dr. de mey told Reuters: “Sri Lanka unreasonably promises to repay its debt. A more prudent approach is to suspend debt repayment and meet key economic needs.”
At present, investors in the international financial market, the Asian Development Bank, Japan, China, the International Monetary Fund and India are the main creditors of the Sri Lankan government. In January this year, Sri Lanka proposed a restructuring loan to China. The Central Bank of China has approved a $1.5 billion currency swap agreement with the Sri Lankan government. Currency swap agreements can be understood as lending between central banks of various countries. When their central banks encounter foreign exchange liquidity problems, they borrow some foreign exchange from the agreement countries. According to the currency swap agreement, Sri Lanka’s foreign exchange reserves can theoretically be increased to US $3.1 billion. In addition, India has also provided Sri Lanka with a US $912million loan and two other US $1.5 billion credit lines.
However, Sri Lanka is heavily indebted. In addition to debt restructuring, it must also receive additional blood transfusion, that is, international assistance. Sri Lankan economists believe that the rescue of the International Monetary Fund (IMF) is the best choice for the country to get rid of its debt difficulties. They have drafted a rescue plan and obtained the approval of the IMF, which can provide about 2billion special drawing rights (2.8 billion US dollars). Usually, when emerging countries encounter economic crises, the International Monetary Fund is the main international rescue institution, which can not only provide loans, but also boost the confidence of creditors and investors.
Earlier, Sri Lankan President Rajapaksa clearly opposed the intervention of the International Monetary Fund, saying it violated sovereignty. However, now the president has appointed a group of financial experts to try to communicate with the International Monetary Fund to find a solution to the debt crisis.
This is a challenge often encountered by the International Monetary Fund in international rescue. During debt relief or debt restructuring, creditors are worried that the debtor will default again, and generally put forward some requirements, such as financial disclosure, increasing income and reducing expenses. Whether for large real estate developers or a government, creditors generally put forward binding clauses to reduce risks. The International Monetary Fund employs a group of professional economists to provide comprehensive solutions to the donor countries in terms of fiscal and monetary systems or policies. The reason why debtor countries fall into bankruptcy is usually the defects of their fiscal, monetary and banking systems. However, these issues also involve national sovereignty, and stakeholders are easy to reject it on the grounds of national sovereignty.
The most typical case is the rescue of South Korea by the International Monetary Fund during the Asian financial crisis in 1997. This crisis has impacted the fragile bank risk control of South Korea, with a sharp devaluation of the currency, capital outflows, and foreign exchange emergencies. The South Korean government appealed to the International Monetary Fund for help. One of the conditions for the latter to rescue is to reform the South Korean banking system. It turned out that Korean banks have been controlled by chaebols for a long time, and have become cash machines of chaebols. Bank risk control is fragile, the financial crisis is coming, and a large number of credit defaults. The International Monetary Fund attempts to cut off the interest chain between plutocrats and commercial banks to reduce the risk of currency collapse and debt default. The South Korean Chaebol strongly opposed it and set off a wave of nationalism on the grounds of national sovereignty. Fortunately, the then president of South Korea, who was elected by the people, decisively accepted the rescue of the International Monetary Fund and successfully survived the disaster while weakening the control of the chaebol over the bank.
Therefore, debt restructuring or international rescue are facing a deeper problem, that is, national restructuring. At present, the economic governance ability of President gothabaya and his Rafael family does make creditors worried that Sri Lanka has become a debt black hole. The local people also lost confidence in the La clan, and some protesters demanded that Gotabaya and his family step down. The family is losing the trust of the ruling coalition and cabinet members. Sri Lanka’s parliament held its first meeting after the president announced the national emergency order, and at least 42 members of the ruling coalition left the seat. As a result, the ruling coalition lost a majority of two-thirds of its seats. In the late night of April 3, 26 ministers in Rajapaksa’s cabinet submitted resignation letters. The president appointed four new ministers, but the finance minister quit after only one day in office, and the governor of the central bank also resigned. Today, the Sri Lankan government leaves only members of the La family, President Rajapaksa, and the prime minister is his brother Mahinda.
This is just the tip of the iceberg in Sri Lanka. Today, Sri Lanka has become a typical representative of failed countries. However, Sri Lanka (Ceylon) was favored by the world after its independence in 1948. People gave Sri Lanka the reputation of the first “Pearl of the East” rather than Hong Kong, China. In his memoirs, Lee Kuan Yew felt sorry for Sri Lanka: “however, God, the result was counterproductive. During my visits over the years, I watched a country with boundless prospects gradually decline”, “(this country has) become a synonym for dispute, grief, sadness and despair, which is really sad [5]”. In the late 1970s, President jayawardna tried to build Sri Lanka into a small Singapore, but his idea was dashed by the 25 years of civil war. The main contradiction of the civil war is that there is a conflict of interest between the Sinhalese who believe in Buddhism and the Tamil who believe in Hinduism, which account for 74% of the population.
Since 2000, Sri Lanka has entered the era of Rajapaksa family rule. In 2005, Mahinda Rajapaksa became president, and his brother was appointed gothabaya Rajapaksa as the Permanent Secretary of the national defense force to manage the three armed forces, and finally won the civil war. After the civil war ended in 2010, the Sri Lankan parliament passed the 18th amendment to the constitution, lifting the restriction on the term of office of the president. The president is directly elected by the people for an unlimited term of office, integrating the head of state, head of government and commander in chief of the armed forces, and is not responsible to Parliament. In 2019, Gotabaya became president, and Mahinda, the former president, was transferred to prime minister. At the same time, his eldest brother chamar was appointed Minister of agriculture, his youngest brother Basil was appointed Minister of finance, and his nephew namar was appointed Minister of sports. In this way, the Sri Lankan government has completely become a la clan government. Now, the protesters are targeting the La clan, but President Gotabaya said he would not resign.
The traps of many emerging countries are essentially institutional traps. The introduction of foreign capital, foreign debt and technology is relatively easy, but the endogenous system is difficult and accompanied by noise. Like Sri Lanka, the government is prone to abuse money, plunder people’s wealth, implement import bans, and compete with people for foreign exchange. At the same time, fiscal discipline is relaxed, debt is out of control, and the country is brought into the abyss of sovereign credit bankruptcy and humanitarian crisis.
Originally, it was ill fated and unlucky. The global energy crisis and food crisis caused by the Russian Ukrainian war this year have impacted the most vulnerable countries and the lowest people on earth. This will be a humanitarian disaster. Unfortunately, this is only the beginning. In today’s so-called grand narrative, I hope more people will pay attention to those hungry people who have no money to buy food, as well as some people who should not have been hungry but are still hungry.
reference:
?1? Sri Lanka on the brink of bankruptcy? Guan junran, Observatory;
?2? Annual report, Central Bank of Sri lanka
?3? The current situation, essence and impact of Sri Lanka’s foreign debt problem, Ning Shengnan, China International Studies, 2019-01-009;
?4?Palitha Pathberiya& Albert Wijeweera, “Overview of the External Debt Situation in Sri Lanka”,UNEAC Asia Papers, No.9, 2005,p7.
?5? Memoirs of Lee Kuan Yew, Lee Kuan Yew, Yilin publishing house.