The SRI LANKA Story.

Previously posted on my Facebook page.

NEWS. “Sri Lanka Collapsed First, but It Won’t Be the Last.” / “Out of Cash and Out of Fuel, Sri Lanka Runs on Patience.” New York Times adds: “The rage at the failure and corruption of a ruling elite is matched by generosity and ingenuity to prevent complete collapse and anarchy.” Yet this new story of gargantuan economic ruin is summed up as this: “Western debt killed Sri Lanka.”

       Others may as well follow, I fear—as beleaguered nations crippled by Covid pandemic and the ensuing oil/gas crisis, are poised to repeat the same mistakes as West’s I.M.F./World Bank and East’s AIIB and Asian Development Bank compete in dangling carrots to the hungry.

       What happened to this ancient South Asian land of rich and diverse cultures, languages, and ethnicities? Fact is, Sri Lanka's GDP in terms of purchasing power parity is the second highest in the region in terms of per capita income. In the 19th and 20th centuries, Sri Lanka—formerly known as Ceylon--became a plantation economy famous for its production and export of cinnamon, rubber, and Ceylon tea, which remains a trademark national export.

       You may google/wiki rest of history. Let’s fast forward to 2021/2022. Observers blame these factors as contributory to the crisis: Tax cuts, money creation, a nationwide policy to shift to organic or biological farming, the 2019 Sri Lanka Easter bombings, and the impact of the Covid-19 pandemic. Trade complexities that ensued per Ukraine War also added to the problem/s.

       I say, corruption sealed `em all. The twin sibling of mishandling of sovereign debt amidst these times of super-active geopolitical competition. 🇱🇰🇱🇰🇱🇰

NEWS before the smoke of distress subsided: “Showdown at the Mansion Gates: How Sri Lankans Rose Up to Dethrone a Dynasty.” An army of nuns, farmers and middle-class professionals felt a duty to save their virtually bankrupt nation. Apparently, their fight is far from over.

       The warning call seems a déjà vu of past horrors. The perils of sovereign debt, defined as the amount of money that a country's government has borrowed, typically issued as bonds denominated in a reserve currency. The country’s debt is held by multiple creditors, notably China, India and Japan. If we count the debt held by Chinese banks, such as EXIM Bank of China and the China Development Bank, the percentage of Chinese-held debt is somewhere around 26 percent.

       But then, the largest portion of Sri Lanka’s debt is held by commercial institutions. Over the last 20 years as Colombo’s debt has gone from low interest rate concessionary lending from the World Bank or the Asian Development Bank to mostly commercial loans held by private banks at much higher interest rates. In 2019, 56 percent of Sri Lanka’s debt was held by commercial lenders, compared to only 2.5 percent in 2004. Much of this debt was used for large infrastructure projects that did not produce returns to pay up.

       Sure, media blames China per “debt trap diplomacy” but this trade/debt trickery has long been a creditor/debtor fact since time immemorial, before Beijing fully opened its economic door in 2000. Whoever hands out loan: I.M.F., World Bank, AIIB, China’s 5 state-owned banks, ADB etcetera. If a debtor nation’s leadership is bereft of wisdom, economic collapse is expected. 🇱🇰🇱🇰🇱🇰

RANIL Wickremesinghe, a canny political survivor with ties to the exiled former president, inherits a nation in deep crisis. So light at the end of the dark tunnel isn’t (yet) visible at this juncture.

       The roots of the current political crisis are directly tied to former President Gotabaya Rajapaksa and his family, including his brothers former Prime Minister Mahinda Rajapaksa and former Finance Minister Basil Rajapaksa. Gotabaya came to power in 2019, and in 2020 his party, the Sri Lanka People's Front (SLPP), was able to consolidate its supermajority in parliament on a banner of populism and Sinhalese nationalism.

      What follows is like a replay of Marcos Family Philippines pre-1986: Dictatorial-styled corruption, nepotism, cronyism, elevation of retired military officers into almost every sector of government, human rights violations. Of course, we have heard, read, even experienced all these in the past.

      What awaits the 22 million Sri Lankan humanity? There is hope, still. Unemployment rate is 4.3 percent which isn’t so bad. The country’s main economic sectors tea export, apparel, textile, rice production and other agricultural products will recover soon. Why? As of June this year, Sri Lanka posted a trade surplus of $21 million, switching from a $652 million deficit a year ago. And tourism should pick up soon.

      But as I said below, the people’s fight is far from over. 🇱🇰🇱🇰🇱🇰