Sri Lanka – a South Asian island nation largely dependent on tourism – has turned into a shining example of how a country, despite being ravaged by financial woes, can bounce right back with an effective and timely strategy.
Once besieged by protests and unrest, law and order has returned to the country. This report is about how deep Sri Lanka’s crisis was, and how the disaster was overcome.
What happened in Sri Lanka in 2022 was indeed a revolution. The country was in dire financial straits due to the negative impact of foreign debt and internal mismanagement.
Sri Lanka generally relied on revenues from the tourism sector and foreign remittances to pay off its debt. Besides, they were dependent on new loans. But when the Covid-19 pandemic hit in 2020, it hit the country’s tourism sector hard.
And through this their “debt repay crisis” began. Meaning, the country could no longer supply money for the necessary imports or repaying debt. Images of long queues to withdraw money at ATM booths and returning empty-handed were seen in media and social media.
Within a few days, the import crisis increased to such an extent that the stock and supply of essential food products like powdered milk and medicine reduced. The whole country lost electricity. No food, no light, no medicine.
There is only wailing, and this was the overall picture.
At that time, Sri Lankan Parliamentarian and Tamil leader Shanakiyan Rasamanickam had told the Sri Lankan media, “The recent economic situation in Sri Lanka is very bad. There was a civil war from 1980 to 2009.
“The controversy that is going on now is due to the fact that the political will of the people is not being respected. Even today there is no decentralisation of power.”
Sri Lanka’s comeback
The present picture shows that Sri Lanka has been able to overcome the effects of foreign debt and the financial crisis. Not only that, they have also started paying the loan installments taken from Bangladesh.
There is a supply of daily necessities in the market. There is order on the road. The institutions are running normally. Sri Lankan public life has returned to normal rhythm.
Economists and analysts say that the coordinated application of several strategies is contributing to Sri Lanka’s turnaround. For example, the current Ranil Wickremesinghe government has adopted a policy of austerity and increase in revenue.
They have intensified the process of sending workers abroad. Besides, useful loans have been received from abroad, but there is no “debt trap” as before. The International Monetary Fund (IMF) and the World Bank also stood by Sri Lanka.
India has come forward to play a major role as a “friend in need” while Sri Lanka’s tourism sector has bounced back successfully.
According to a recent BBC report, Sri Lanka’s tourism sector income has increased by 25 per cent in one year. Remittances increased by more than 75 per cent during the same period.
Sri Lanka’s return to its own rhythm, its recovery from the heavy web of foreign debt, has been made possible by their goodwill and collective initiative and by being free from influence.
Production has increased, good days have returned to the agricultural sector. Tea exports increased. The country is also doing well in rubber exports.
Last year when there was a financial crisis, inflation touched 50 per cent in the country. Now it is reduced to only six per cent. Some feel that Sri Lanka could have recovered the economy more quickly.
But due to the war in Ukraine, the transition from the crisis did not happen at the desired pace. At the rate it is progressing, it is expected that the country will be able to return to a completely normal rhythm by next year.
