July 13, 2022

Sri Lanka

Sri Lankan President Gotabaya Rajapaksa fled the country for the Maldives on Wednesday, hours before he was due to step down amid widespread protests over his handling of a devastating economic crisis… Protests against the economic crisis have simmered for months and came to a head last weekend when hundreds of thousands of people took over key government buildings in Colombo.” Reuters

In May Sri Lanka defaulted on its debt and “the energy minister said the country had run out of money to pay for fuel… Hit hard by the pandemic, rising oil prices and populist tax cuts, Sri Lanka's dire economic situation has led to spiralling inflation and shortages of essential supplies.” Reuters

Both sides are highly critical of Sri Lanka’s government for its disastrous policies and authoritarian behavior:

“[After winning elections in 2019 and 2020] The government embarked on a number of wasteful megaprojects. A Times of India report on those projects includes an international airport, a seaport, numerous unnecessary roads and bridges, and a cricket stadium that ‘has had only a few international matches and is so remote that arriving teams face the risk of wildlife attacks.’ Many of these projects were named after the Rajapaksas, an association that would come back to bite them. It wasn’t just a spending spree; the other side of the ledger wasn’t any better…

“But on top of the fiscal troubles, in April of 2021, Sri Lanka announced that it would try to become the world’s first 100 percent organic country. President Rajapaksa banned chemical fertilizer, despite warnings from agricultural scientists and farmers that the country wouldn’t be able to produce as much food without it. A blend of protectionism and medical quackery influenced Rajapaksa’s decision, and it was pitched as a way to create a ‘Green Sri Lanka.’”

Dominic Pino, National Review

“[The Rajapaksa brothers] staffed every consequential ministry with relatives, who often had little understanding of their jobs, and despite the country’s already precarious finances, they proceeded to apply steep tax cuts in an attempt to stimulate the economy. Bad decisions and bad luck followed…

“Just as the tax cuts shrank government revenues, the pandemic devastated tourism, a vital fount of income for Sri Lanka. Facing a balance-of-payments crisis, the government banned the import of motor vehicles and synthetic fertilizers and pesticides to save hard currency and decreed an overnight transition to organic farming. The result was catastrophic: Production of tea — a major source of export revenue — fell some 18 percent and grain output dropped 43 percent. The government saved $400 million by banning foreign fertilizer, but was forced to spend $450 million to import rice…

“The Rajapaksas will no doubt argue that this nightmare would have occurred regardless of who was in control. But to succumb to this reasoning, we would have to overlook how the Rajapaksas debilitated their nation’s democracy and government institutions, and ran the country like a family business. A genuinely democratic government, open to dissent and consultation, might very well have mitigated the suffering that now courses through the country.”

Kapil Komireddi, New York Times

“As defence secretary during his brother Mahinda’s presidency, from 2005 to 2015, [Gotabaya Rajapaksa] oversaw the defeat of the Tamil Tigers; an estimated 40,000 Tamils died and there were numerous documented cases of unlawful killings and forced disappearances. Human Rights Watch alleges that he is implicated in war crimes. As president, he oversaw a sharp deterioration in human rights. Now the jubilant scenes of protesters plunging into his swimming pool and rifling through drawers of underwear as they stormed the presidential palace last weekend have shown that anger has driven out the fear…

“The dramatic turn against the Rajapaksas is a warning to governments everywhere of the dangers they face as food and fuel prices soar; protests are breaking out around the world. Even as Sri Lankans stormed the palace in Colombo last Saturday, thousands were in the streets of Tirana, Albania. The public’s rejection of the family should be especially salutary to leaders who have relied upon patronage and authoritarianism rather than attempting to answer real needs. A reputation for ruthlessness is not enough.”

Editorial Board, The Guardian

“What lessons does Sri Lanka hold for the rest of the region? For one, economic development isn’t guaranteed. In Sri Lanka, 500,000 people have sunk back into poverty over the last two years. Second, strongman rule often fails to deliver what it pledges. The Rajapaksas’ promise to revive ancient Sinhalese Buddhist glory ended up alienating swaths of the population. As the prices of fuel, food and medicine rose sharply and blackouts became common, the ruling family found that people often care more about their standard of living than gauzy appeals to cultural pride…

“In living rooms in Colombo, it’s not uncommon to hear Sri Lankans lament that their country could have been like Singapore—prosperous and well-run. Thanks to hubris and mismanagement, it looks increasingly like Venezuela.”

Sadanand Dhume, Wall Street JournalOther opinions below.

See past issues

From the Left

“One factor complicating today’s situation relative to past debt crises is that the most deeply indebted countries owe money not just to Western governments and banks but to private bondholders and, crucially, to China. Some 18 percent of their borrowing is from Beijing, which — unlike democratic counterparts —generally does not offer ‘soft’ credit…

“China and Japan each hold about 10 percent of [Sri Lanka’s] foreign debt, but the latter’s money came at much lower interest rates and longer maturities, according to Nikkei Asia. China also operates separate from the Western-backed Paris Club of official creditors, which makes transparency about the loans it has extended elusive…

“The United States should use its power as the IMF’s largest shareholder to help countries restructure their debts, but this will be much harder to do with a multiplicity of private bondholders involved and with China engaged in the equivalent of international predatory lending. Sri Lanka presents an opportunity for the Biden administration to fashion a rescue in conjunction with other members of the Quadrilateral Security Dialogue — India, Japan and Australia. That could both mitigate suffering and show the entire Indo-Pacific that it pays to deal with the United States rather than China or Russia.”

Editorial Board, Washington Post

From the Right

“Sri Lanka had been self-sufficient in rice production since 2005. A 20-year-old Sri Lankan has seen the country’s GDP per capita roughly double over his lifetime. In 1990, Sri Lanka’s GDP per capita was about $2,000 greater than in nearby India. By 2020, it was more than $6,000 greater. But after the fertilizer ban went into effect, rice production fell by 20 percent in only six months

“Sri Lanka was the first developing country to come undone, but it will not be the last. Its green agricultural policies and exceptionally poor leadership drove it to collapse faster than other developing countries, but the basic global factors that affected it will affect other developing countries as well… most concerning is nuclear-armed Pakistan. Located between India, China, and Afghanistan, with 240 million people and a long history of political turmoil and instability, Pakistan already is dealing with soaring inflation and high debt levels; a Sri Lanka-like collapse there would be devastating…

“U.S. policy-makers, including central bankers at the Federal Reserve, must pay attention… and environmentalist zealots should be kept far away from the levers of government power, here and everywhere else. Rejecting the blessings of modern farming technology and energy production is a recipe for disaster.”

The Editors, National Review

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