Sri Lanka has descended into anarchy, similar to that which prevailed for a consecutive period of two years and three-and-a-half months 33 years and eight months ago, from 29 July 1987 to 13 November 1989.
The cause for the present crisis is shortage of essentials, while the cause of the previous was due to a combination of LTTE and IPKF terror in the North and East and JVP terror in the rest of the country. The beginning of the end of that terror was after the Army killed JVP Leader Rohana Wijeweera on 13 November 1989.
However, a hallmark of that terror period was that there were no shortages in the country unlike now. There were two reasons for that, the open economy and the country living within its means, signified by the fact that there were no external commercial borrowings then, the cause for the present crisis.
Previously, Sri Lanka’s expensive foreign commercial debt stock which did not exceed 6 per cent of total foreign debt in the 16-year period from 1990 to 2005 ballooned to 28 per cent at the end of its war with the LTTE in 2009, before further expanding to 51 per cent three years later in 2012 and staying that way up to 2020, according to latest Central Bank of Sri Lanka data. Prior to 1990, all of Sri Lanka’s foreign borrowings were in the form of cheap, concessional loans.
In the midst of the payback periods for both foreign commercial debt and foreign concessional debt due, with the largest being a maturing foreign commercial loan of US$ 1,000 million due in July, the island is struggling to meet its external debt repayments amidst also having to meet payments for essential imports like food (rice), medicines, fuel, cooking gas and coal simultaneously in the backdrop of sparse foreign reserves.
With Sri Lanka giving priority to foreign debt repayments over the need to import essentials, that has brought about shortages with the masses rising against the Government and its agents because of this.
At the time of writing, a death each in the three consecutive days to yesterday has taken place among the elderly, standing in queues for hours and being exposed to the elements to buy essentials, last seen 45 years ago in the seven-year period from 1970 to 1977 when the island practised a closed economy.
The cause of the queues then were due to a political ideology followed by the then Government which allowed no foreign inflows other than in the form of export earnings and foreign loans, whereas the cause for the queues now is due to fiscal profligacy by the Government in power from 17 November 2005 to 8 January 2015.
Frustrations caused by the non-availability of essentials even after standing long hours in queues have resulted in the masses blocking key roads in the city and elsewhere and at least one death by stabbing at the time of writing, among several other protests, including opposite the Presidential Secretariat, Colombo.
In the midst of these, India on Thursday announced a US$ 1 billion aid package to the country to import essentials, while on the same day the IMF announced the possibility of Sri Lanka seeking a loan to tide over its balance of payments difficulties.
Not to be outdone, Chinese Ambassador to Sri Lanka Qi Zhenhong told the Media yesterday that Sri Lanka is negotiating a US$ 2.5 billion credit line with China, of which US$ 1.5 billion will be on a supplier’s credit line and the balance, cash, without specifying details.
China versus the West together with India is eyeing to gain a political foothold in Sri Lanka.
Meanwhile, the European Union (EU) in Sri Lanka in a statement on Thursday appealed for Sri Lanka’s vocal support to condemn the Russian invasion of Ukraine. The statement signed by 18 envoys included the US Ambassador to Sri Lanka, EU’s Head of Delegation, UK High Commissioner and the Japanese Ambassador among others.
The USA, EU and the UK are among Sri Lanka’s top three export markets and Japan, one of its biggest concessional lenders. It’s in Sri Lanka’s political and economic interest to toe their line at this difficult juncture.