Emergency in Sri Lanka

Saurobijay Sarkar

On Friday, May 6th, 2022, Sri Lankan President Gotabaya Rajapaksa declared another emergency, for the 2nd time in little over a month, amidst the massive protests of student, youth and trade unions, in the wake of an unprecedented economic crisis.The ongoing protest reached a peak on Thursday, May 5th, when several hundred people gathered outside parliament in late night, after police tear gassed protesting students, who were demanding the resignation of the President and for positive steps to revive the country’s economy. The agitations continued all day on May 6tth.The working class also was not silent spectator- nearly 2000 workers unions from public and private sector joined general strike on May 5th, in one of the largest strike actions in recent history. The government, which banked on a handful of industrialists, the police and paramilitary, unable to find a way forward, finally declared emergency in order to overcome the resistance of the people.

According to many experts, this is the worst ever economic crisis Sri Lanka faced, but this did not happen overnight. The crisis was a result of the world economic situation, successive mismanagement of several governments over the previous decade. This took a concrete shape on 12th April, when government announced that Sri Lanka would be defaulting on all of its external debt—$51 billion—after running out of foreign exchange for imports. This has a disastrous effect on common people especially poor, with acute shortage food, electricity and all necessary items for daily livelihood. Argentina defaulted in 2001-2002 and later Greece defaulted in 2015, and now Sri Lanka in 2022.

Decades of armed struggle with LTTE with massive expenditure in militarisation, followed by several communal incidents resulted in severe downfall in tourism, Sri Lanka’s biggest source of foreign exchange earnings. Later around 2019 Easter terror bombings of churches and luxury hotels, the hue and cry over national security took precedence over all economic and political affairs in Rajapaksa government and military expenditure further increased.

The economic crisis was already evident by the end of 2019 and this was multiplied during COVID-19 pandemic which hit other foreign exchange earning sectors like apparel and tea exports as global growth and trade faltered. The world-wide economic slowdown coupled with Covid-19 pandemic hit Sri Lanka’s second biggest exchange earner—remittances from overseas Lankans—as thousands of overseas Sri Lankan workers lost jobs. Sri Lanka’s debt- fueled infrastructure, which spread over past decades made conditions much worse at a time, when its foreign exchange reserves were dwindling and the current account deficit widening. As a result, the inequality, which is a general pattern in every country, increased by leaps and bounds.

In financial markets, the process of globalisation opens access to borrowing, lending and investing , however if a country is not able to build a sufficient self-sustained economy in urban and rural areas using its own natural resources, it will be entangled in loan scheme, which for IMF and World Bank has high interest rates. In case of Sri Lanka, the major part of loan amount was from China, but the same story repeats. Here is an example of Venezuela. In the time of Hugo Chavez, Venezuela nationalised major oil and cement industries, which if properly planned and controlled can contribute to the country’s GDP without taking much austerity measures. This led to confrontation to Chavez government with America and national privileged elite as well. This is impossible for a corrupt capitalist government like Sri Lanka that relies on multinationals, bureaucracy, country’s corrupt industrialists, police, military and, essentially wage war against ordinary people.

But a series of pro-corporate policy measures and blunders, particularly by the Gotabaya Rajapaksa government after its return to power in 2019 made the situation worse. As per the electoral promise the Rajapaksa government undertook some sweeping tax reforms after it returned to power in 2019. The reduction of Tax rate for both indirect and direct taxes aimed at increasing consumptions failed to address the basic problem. This decision of tax reform mainly served the industrialists, privileged upper middle class, but not the marginal plantation workers for example. Secondly, the disastrous decision to shift overnight to organic farming and total ban on the use of chemical fertilisers and pesticides wreaked havoc with the country’s critical plantation sector and nearly halved the output of rice crop. Although the decision has been mostly rolled back now, the impact will take much longer to repair.

The unnecessary dream infrastructure projects aimed to project Sri Lanka as ‘London ‘ or ‘New York’ and no relation with the lives of common people resulted to get entangled with more loan.

The massive inequality was evident everywhere. The crisis is really severe—the price of milk powder jumped by close to 1,000 Sri Lankan rupees in days. One kilogram of rice now costs around 500 rupees. The power cut was happening massively, in order to save expenditure. The cause of the crisis stems back to Sri Lanka not having enough money to adequately pay for heavily-relied upon imports, including import of some essential commodities .So which way forward?

The poor unfortunately had no right to recall the corrupt politician. Apart from one day voting rights, they can only express their anger through mobilisation and they should continue to do so in order to force government not to take any draconian measures in order to pay the dues. Government it seems, now will take loans further from IMF, which they earlier declined due to harsh conditions imposed by IMF. Struggle should erupt in every country to force respective governments to help Sri Lanka without imposing harsh conditions.

The condition Sri Lanka is facing today can happen anywhere. In Pakistan, what is happening currently after the ouster of Imran Khan as prime minister is a reflection of deep-rooted economic and political crisis.

India, although economically stronger with respect to Sri Lanka, Pakistan etc is also facing crisis and that is passed on working people and wage earners in general. Although apparently it appears that condition of bankruptcy may not appear immediately, the conditions of toilers are getting worsened day by day. Even if the decision for Tax reform and Organic farming did not take place here, the earlier policy of demonetisation, new agricultural laws (which are finally rolled back), and new labour laws, price hike in all aspects including price hike of petrol, diesel, slash of interest in small savings are all attacks on common people, whereas demonetisation was a desperate attempt to overcome the money crisis, the banks are facing, although it led to more problems instead of easing them. As per the latest news, India extends $2 billion credit line to Sri Lanka for food and medicine, whereas China extends $2.5 billion credit. This may not be sufficient to tide over the mounting crisis.

A recent webinar organised by AIPF (All India Peoples Forum) with prominent human rights activists and economists from Sri Lanka tried to enlighten the root cause of the crisis and the ongoing mass revolt in Sri Lanka. A critical task in Indian sub-continent, where every attempt of the ruling class and party is to create an environment of hyper nationalist and communal jingoism, is to organise workers, farmers, students, youth based on internationalist ideology to defeat all anti-poor policies and the policy of ‘divide and rule’ of the ruling dispensation everywhere.

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Frontier
Vol 54, No. 48, May 29 - Jun 4, 2022