The reasons for this economic crisis in Sri Lanka are numerous and complicated. The protests continue as the government is unable to impeach President Rajapaksa. The opposition shows little sign of joining a government of national unity. As a result, Sri Lanka’s government is stuck mucking along and hoping that the outbreak of cholera ends soon while trying to ensure the long-term financial health of the nation. In the coming years, this pattern will likely repeat itself across many developing countries.
What led to the economic crisis?
A high level of inflation in a country’s economy makes it more difficult to repay debt. Sri Lanka’s economy is highly vulnerable to shocks from abroad. Its government spent foreign currency for debt repayment, leaving it with little left for its own economy. Despite its relatively large foreign exchange reserves, the central bank has been running down its reserves in recent months to keep the rupee stable, leading to inflation that topped double digits. A devastating Covid-19 virus struck the island nation’s tourism-driven economy, further aggravating the country’s debt burden.
The food shortage led to an increased price tag for daily imports. The government had to borrow foreign currency to buy the goods it needed. As a result, the currency depreciated in value, making it more expensive to import. It is this devaluation that led the Sri Lankan people to vote out of the government and overthrow the government. This situation is similar to many other currency crises in other countries and can be traced back to poor foreign exchange management.
What’s happening with the protests?
What’s happening with the protests? The protests in Iran have caused a stir in the world, as the US President endorsed them. Trump said on Wednesday that the US could provide tremendous support for the protesters. However, a conservative Iranian narrative has blamed the protests on foreign powers, while the current US administration flouted international law. So, what’s going on? How do you stay informed?
The anti-Trudeau protests have become a nationwide movement. Protesters are calling for the elimination of public health restrictions and have vowed to continue protesting until Trudeau resigns. However, the protests have morphed into a full-scale revolt against the government. Some protestors have called for a boycott of the Canadian government and the federal government, while others have threatened to continue protesting until Trudeau resigns.
Fertilizer ban hits Sri Lankan food stocks
The ban on chemical fertilizers for agricultural use has left Sri Lankan farmers in a precarious situation. The country’s president imposed the ban in April last year, drastically reducing crop yields. While the government later reversed the ban, imports have been minimal for the current planting season. Despite this, farmers still face an acute shortage of food and other supplies. And with their foreign exchange reserves dwindling, importing food and other supplies will be impossible.
The government’s decision to ban the use of synthetic fertilizers has caused a sharp increase in prices, despite the government lifting the ban on some types. The ban also has impacted tea production, and the country’s currency has devalued due to soaring inflation and food prices. The government finally lifted the ban last month, but the ban remains in effect for some crops. The government’s $200 million compensation does not make up for the suffering caused by the ban.
Amidst the turmoil, angry mobs have launched attacks on the government, politicians, and homes. Hundreds have been injured and a few have died. A member of parliament was killed in his car, and two more of President Rajapaksa’s siblings and nephews resigned from their cabinet posts. The country’s economy has suffered as it tries to recover from the devastation and remains in default.
As the economy continues to suffer, public anger has grown over the government’s handling of the economy. Due to government mismanagement, food and fuel inflation has soared. Fuel and cooking gas shortages are commonplace, hitting those already struggling to make ends meet. Several recent events have further escalated public anger. In the midst of this, the government has reverted some policies that were contributing to the current economic situation.
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