Sri Lanka’s economic crisis has turned violent, with eight people killed and more than 200 injured in protests across the country, with the country’s powerful prime minister resigning and his brother, who is also the country’s president. Looking for ways to escape the stage.
Anti-government protesters angry over power outages, shortage of basic necessities and rising prices are also demanding the resignation of President Gotabaya Raja Pakse, but a retired army officer has called for emergency measures to control the situation.
The economic downturn, violence and political turmoil have gripped the island nation of 22 million people. India, meanwhile, has approved an extension of billions of dollars in loans to Sri Lanka to help pay for essential goods.
Analysts say China, which has invested heavily in infrastructure projects in recent years, is seeking to increase its influence across Asia.
China has said it is working to restructure the debt of the Sri Lankan people in order to lift the country out of the economic crisis.
Significant talks with the International Monetary Fund (IMF) on Sri Lanka’s bailout plan as well as its sovereign debt restructuring plan could be disrupted.
How did it happen
Analysts say successive economic mismanagement has weakened Sri Lanka’s public financial interests, leaving national spending higher than its income and inadequate production of tradeable goods and services.
Immediately after assuming power in 2019, the situation was further aggravated by the huge tax cuts made by the Raja Pakse government, and a few months later, the Kovid 19 epidemic struck, further aggravating the situation.
The Raja Pakse government took wrong steps to eliminate Sri Lanka’s major sources of revenue, especially from the lucrative tourism industry, as well as remittances from Sri Lankan citizens working abroad.
In this regard, the country’s financial rating agencies have expressed concern over the delay and inability to repay government and large foreign loans.
Sri Lanka’s credit rating was downgraded to less than 2020, which eventually pushed the country out of the international financial markets.
To keep the economy afloat, the government relied heavily on its foreign exchange reserves, which have shrunk by more than 70% in two years.
What did the government do?
Despite the rapidly deteriorating economic situation in the country, the Raja Pakse government initially suspended talks with the IMF.
For months, opposition leaders and some financial experts urged the government to pursue an effective and coherent policy, in which it took other steps in the hope of restoring tourism and restoring remittances.
The Sri Lankan government later sought help from other regional superpowers, including India and China. In this regard, India says it has provided more than 3.5 3.5 billion in aid this year.
Earlier in 2022, President Raja Pakse asked China to extend the repayment period of Beijing’s 3.5 3.5 billion debt. Sri Lanka has finally started talks with the IMF.
Despite the support of various countries, the shortage of fuel in the country has led to long queues of people at filling stations as well as blackouts and severe shortage of some medicines.
What happens next?
To control the situation, President Raja Pakse sought the support of leaders of all political parties in parliament to form a national government, a proposal which was rejected by many leaders, including allies of the ruling coalition.
Yesterday, the president’s elder brother, Prime Minister Mahinda Rajapaksa, tendered his resignation after intense public protests, and wrote that he was resigning in order to form an interim and all-party government in the country.
According to a cabinet spokesman, the president plans to meet with opposition politicians in the next few days to form a new government.
But thousands of protesters, who have been camping on the streets for weeks chanting “Gota (Bia) go home”, also want the president to resign after the prime minister.
Two days ago, pro-government and anti-government protesters clashed in the commercial capital Colombo, escalating violence and setting houses and vehicles on fire in other parts of the country.
Some Sri Lankan business groups are relying on the country’s politicians to find immediate solutions.