The lessons of the economic crisis in Sri Lanka

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Images of Sri Lanka’s presidential palace being overrun by protesters, such as the storming of the Bastille, and Prime Minister Ranil Wickremesinghe’s private residence being burned to the ground sent shockwaves around the world. Especially in the Indian subcontinent, where Sri Lanka was considered much more educationally and socially advanced than its neighbor. The instability, which is now turning into chaos, is a harbinger that our world is going through a serious crisis.

In a contrary area, sports fans were disappointed on Saturday, which was also Eid Al Adha, that the very talented and courageous Ons Jabeur did not become the first African, Muslim and Arab-Berber woman to win the women’s championship. of Wimbledon. His performance throughout the tournament was superb, amply justifying his ranking in the top three in the world. She was dominated by the much younger Russian-Kazakh Elena Rybakina, the new champion. Rybakina, the first Kazakh player to win the Wimbledon women’s title, brought honor to the small Central Asian nation. The men’s final went Novak Djokovic’s way. The Serb won his seventh title by beating Australian sniper Nick Kyrgios in a thrilling final.

In Sri Lanka, the hope is that a multi-party emergency government, with integrity and the national interest as its watchwords, can restore order and normalcy. Exports and tourism need to be improved, along with new avenues to increase government revenue.

The contrast between the elegant and majestic final of Wimbledon on Sunday, despite the resignation of British Prime Minister Boris Johnson, with the misery and disorder of Sri Lanka could not be starker. In the UK, despite the political mess, the elegant ladies and gentlemen watching at the All England Lawn Tennis and Croquet Club, which will soon celebrate its 153rd anniversary on July 23, presented an image of wealth, order, stability and of continuous sporting excellence, with spectators from all over the world, a privileged few no doubt from Sri Lanka itself.

Back in Sri Lanka, however, petrol is not only over 500 Sri Lankan rupees for a litre, but simply unavailable. Cooking gas for the house and fireplace is almost impossible to find; people resorted to burning twigs and branches to boil their pots of rice. Food prices have soared, rising more than 40% in recent months. There are huge blackouts, with homes and offices without electricity for several hours.

Schools and colleges are closed. Government offices operate only four days a week. The balance of payments crisis is so severe that the country is simply running out of foreign currency to pay for its imports. And now ordinary people seem to have overthrown a once popular government for completely mismanaging the economy and ruining their beautiful island nation.

Protesters outside the presidential palace in Colombo, Sri Lanka, July 10, 2022. President Gotabaya Rajapaksa, who fled his official residence before protesters stormed it, and Prime Minister Ranil Wickremesinghe said that they would resign, paving the way for the interim speaker of parliament. President.
Image credit: Bloomberg

On the one hand, the citizens’ coup could be hailed as a peaceful revolution, the expression of popular power in a still functioning democracy. On the other hand, it could be considered a matter of serious concern. With President Gotabaya Rajapaksa, who fled his official residence – some say using a secret underground tunnel – and Prime Minister Wickremesinghe announcing their resignation, political uncertainty in the country will continue. The parliament should appoint a president and a prime minister for his term. Maybe there will even be new elections.

While the new leadership will try to fast-track another bailout from the International Monetary Fund (IMF), its 17th in seven decades, the country’s fundamental financial problems will not be solved instantly. The country of 22 million people is heavily dependent on foreign tourists and remittances, but both declined after the 2019 Easter church bombings and the Covid-19 pandemic. The war in Ukraine has sparked global instability with rising fuel prices, inflation and political uncertainty, as signaled by the assassination of former Japanese Prime Minister Shinzo Abe a few days ago.

The simple rule of spending less than you earn applies to nations as well as individuals. Except, paradoxically, the United States, which can continue to print money, it seems, to finance its incessant appetite for conspicuous consumption. But for how long ? Inflation, soaring fuel prices and growing inequality have strained its already worn, if not torn, social fabric. Associated with a weak leadership, the first world power is no longer able to impose either the respect or the power to stabilize the world order as it once had.

In Sri Lanka, the hope is that a multi-party emergency government, with integrity and the national interest as its watchwords, can restore order and normalcy. Exports and tourism need to be improved, along with new avenues to increase government revenue. India is doing what it can, with more than $4 billion in aid pledged. But Indian leaders and mandarins will need to closely monitor and manage its economy, which faces similar challenges to those of its neighbors.

The crisis is, after all, not local but global. Growing debt, social unrest, food shortages and out of control fuel prices are some of the main causes of the spread of economic gloom in rich and poor countries. But each country must find its own way to deal with its particular conditions and challenges. Crisis response, therefore, to reinvoke a once fashionable but now all but forgotten neologism, will have to be glocal – responding to global calamities with local opportunities.

For us in India, the lessons of Sri Lanka should be obvious. Strong if not visionary leadership, social cohesion, fiscal prudence and intelligent steering of the ship of state in globally troubled waters. As opposed to excessive populism, handouts, bailouts, ideological grandstanding and continued civil unrest. These are among the greatest threats to democracies and free societies around the world. Let’s wake up: for us, despite the global contagion, the enemies are much more internal than external.

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