Sri Lanka’s prime minister has told that nation’s parliament that the national economy has, for all intent and purposes, collapsed. Ranil Wickremesinghe informed lawmakers that Sri Lanka is “facing a far more serious situation beyond the mere shortages of fuel, gas, electricity and food. Our economy has completely collapsed.” Wickremesinghe’s remarks did not bring any new developments to light. In fact, the rather new prime minister’s words seem intended to remind lawmakers and his critics that the task of rebuilding Sri Lanka’s economic foundation will take time and much effort. After being in power for roughly one month, opposition party politicians are attempting to lay blame for the economic collapse upon Wickremesinghe’s shoulders. As the nation slides deeper into economic malaise, the politicians are attempting to cover their own backsides and assess blame upon others.
The collapse of the national economy came about at least partly due to a perfect storm of circumstances. Heavy debt, loss of tourism revenue, a foreign currency crisis and other pandemic-related impacts, as well as the soaring costs of commodities are the main ingredients of Sri Lanka’s economic nightmare. The nation is no longer able to buy imported fuel, even for cash, due to the heavy debt owed by Ceylon Petroleum Corporation. There are no nation-states or supranational bodies willing to provide fuel, creating significant fuel shortages.
The Sri Lankan government plans to call India, China and Japan to a donor conference in early August in an attempt to increase foreign financial assistance. An interim budget will be presented around the same time. This is hoped to help Sri Lanka’s position in negotiations with the IMF. August will be when geopolitics takes on a broader and more significant position in Sri Lanka’s economic crisis. India and Japan will seek to raise their influence with Colombo while simultaneously reducing China’s influence. India and Japan, as Quad members, have political and military incentive to work together and push back China’s inroads in Sri Lanka. Beijing is attempting to move deeper into the Indian Ocean and establish basing rights for Chinese warships in an area historically regarded as the Indian sphere of influence.
Sri Lanka is girding for potential shortages of food products and fuel in the near future. Citizens have been lining up for cooking gas, automobile fuel since Friday. As the government attempts to stave off complete economic meltdown, the nation has defaulted on debt for the first time in its history. So, much to the chagrin of Sri Lanka’s leaders, the economic outlook remains bleak as the government lifts the state of emergency decree that has been in place since early May. The state of emergency went into effect as a result of violent street protests and riots in Colombo and across the country in late April and early May. The root cause of the unrest was spiraling inflation and other factors of the nation’s economic crisis.
India and Japan will provide emergency relief to the island-nation in a bid to stave off a complete collapse. The first ship laden with food and other material will depart from India on Wednesday. Japan will provide an emergency grant for $3 million worth of medicine and food. These moves also have geopolitical purpose as both nations would prefer to keep Chinese involvement in the Sri Lankan crisis at bay. Tokyo and New Delhi are wary about offering an opening for China to expand its presence and influence in the Indian Ocean region.
Public anger and frustration is threatening to boil over in Sri Lanka amid a growing economic crisis that has greatly diminished the standard of living and now threatens to unseat the current government. Sri Lankans are defying the present state of emergency which bans public gathering and protests. Sri Lankan President Gotabaya Rajapaksa declared the emergency on Saturday, hoping to prevent the large-scale demonstrations that were scheduled for today (Sunday, 3 April, 2022). Along with restricting public movement and imposing a curfew, internet access was also severely limited, a move that has caused dissent within the Sri Lankan government.
The government’s heavy-handed moves come in response to a demonstration involving thousands of people outside Gotabaya Rajapaksa’s home in Colombo. The protest began peacefully but turned violent when security forces used tear gas and water cannons on the crowd. Demonstrators responded by throwing rocks and setting fire to vehicles used by the security forces. Over fifty demonstrators were arrested, and two dozen security officers suffered injuries.
The root cause of the present situation is the government’s handling of the worst economic crisis to hit the island nation in decades. Conditions have been going downhill for some time owing to a combination of events and circumstances that started with the Easter Sunday bombings of 2019. Those attacks, which killed over 250 people, hit Sri Lanka’s tourism-reliant economy very hard. Next came the COVID-19 pandemic which placed heavy pressure on the currency. Along with a host of other factors, these landmark events have combined to produce a situation where Sir Lankans find it increasingly difficult to purchase fuel, medicine and other essential goods.
All eyes are now on Gotabaya Rajapaksa and the government. How the nation’s leaders react to public defiance of the curfew and state of emergency will determine what the next phase of the crisis will bring. Already, many politicians from parties in Gotabaya Rajapaksa’s governing coalition are starting to grow antsy. Calls that he appoint a caretaker government that represents all eleven parties represented in parliament are growing louder. The Sri Lanka Freedom Party, a coalition member, announced on Friday that it will leave the coalition unless Rajapaksa takes measures to “alleviate the economic crisis, after which an election must be called for.”
Sri Lanka was rocked by explosions at churches and hotels in the capital city of Colombo early Sunday morning. The casualty count is high and will likely rise in the coming hours. As of now 207 people have died and 408 have been injured. Three churches were targeted with blasts occurring there during Easter services. The other explosions took place at four hotels around Colombo. The Shangri-La, Kingsbury and Cinnamon Grand hotels were confirmed to have been struck, as well as one unnamed hotel.
The Sri Lankan government is treating this as a terror incident. There are reports surfacing that seven suspects have been arrested although this has yet to be verified. No group has yet claimed responsibility for the attacks. A national curfew has been put in place, and social media across the country has been blocked. Rumors of more attacks planned in the coming hours have prompted Sri Lankan officials to urge its citizens to stay in their homes and remain calm. Security has been increased at Bandaranaike International Airport, the nation’s main airport, and the military has been deployed in large numbers.
The international community is rallying around Sri Lanka right now. President Trump has offered condolences and said the United States is prepared to help. Other world leaders have sent similar messages as well. There’s been an outpouring of condemnation in the aftermath of the attacks. The fact that the attacks have come on Easter Sunday make them even more heinous in the eyes of the world, and has led some to wonder if the motivation behind these bombings was religious in nature.
The Sri Lankan government formally handed over control of the strategic port of Hambantota to China last week. The two nations signed a 99 year lease that gives the Chinese almost-complete control of the port as partial payment on the $8.8 Billion debt Sri Lanka owes to the PRC. China’s presence in Sri Lanka has grown over the last five years and the relationship between the two has flourished as a result. Chinese firms have invested billions of dollars to modernize Sri Lankan port facilities as part of the ‘One Belt, One Road’ drive to expand Chinese market reach.
Concern is expanding across South Asia over China’s investment in Sri Lanka and the level of Chinese involvement in the region overall. Instinctively, New Delhi is alarmed, and suspicious of further Chinese encroachment upon its sphere of influence. The Indians are wary of the growing Chinese challenge to its regional hegemony. Consequently situation in Sri Lanka is hitting close to home both literally and figuratively. The island nation is situated just off India’s southeastern coast and it has been firmly inside of India’s orbit for years. India has invested large sums of treasure, and material to stabilize the island. To address the Chinese presence and influence, India has partnered with Japan to develop Sir Lanka’s eastern coastline, and improve the existing infrastructure there. Beyond India, pushback over Chinese investments and influence has occurred in Nepal, Pakistan, and Myanmar.
India-China relations are still on the mend following the Doklam standoff earlier this year. Both nations appear sincere in their desires to see ties continue improving. However, the potential for an economic proxy war in Sri Lanka is quite real. This situation, along with other rising economic and security challenges in the region threaten to disrupt those relations indefinitely. China is aggressively using its economic power to extend its geopolitical influence far beyond its own borders.
With that influence now butting up against Indian shores, the ball is in New Delhi’s court. India’s response could very well define India-China relations for some time to come.