All said and done, millions of Sri Lankans living in Sri Lanka and in several countries abroad as well as those who admire the Sri Lankan culture and traditions for various reasons and millions of tourists who have visited the country and enjoyed the beautiful landscape of the land and local hospitality, are shocked and surprised that economic crisis in Sri Lanka has been allowed to become so severe now.
This is particularly so, since Sri Lanka’s human development index value for the year 2019 puts it in the high development category.
There are more than one reason for Sri Lanka’s present crisis. While some reasons are beyond the control of the Sri Lankan government, there are other reasons which could have been prevented or anticipated and the intensity of the problem could have been reduced by implementing pragmatic forward planning measures.
It is true that foreign exchange inflow due to tourism in Sri Lanka has severely fallen due to two years of pandemic. Sri Lankan government could do nothing about this.
The decision of Sri Lankan government to switch over to organic farming and import organic fertilizer from China has resulted in disastrous consequences.
The efficacy and overall advantages of organic fertilizers over chemical fertilisers is still a matter of debate all over the world. Organic fertilizer has a low shelf life and has to be stored, packed and transported in low temperature and sealed conditions and the farmers need to be trained adequately well in handling organic fertilizers.
None of these precautions seem to have been adequately taken care of by the Sri Lankan government.
No country in the world has switched over to organic fertilizer in a massive way like what Sri Lanka has done.
Further, the organic fertilizer supplied by China was declared as sub standard and was rejected by the testing laboratories in Sri Lanka. However, China rejected the complaint that the quality was bad and insisted that Sri Lanka should make the entire payment. Obviously, to keep China in good humor, the Sri Lankan government paid a huge amount of money to China for organic fertilizer that was not used.
Due to the use of organic fertilizer, production of crops such as tea came down severely and the export of such agro products declined, that were contributing to Sri Lanka’s foreign exchange earnings earlier.
Certainly, the present government of Sri Lanka should admit this mistake. But, it has not done in the way that it should be done.
High Interest Loan From China
The Sri Lankan government has been availing a loan from China, which amounts to around 10 %to 15% of its total debt, at a high interest rate.
Since 2000, China has become the leading provider of commercial loans to Sri Lanka for infrastructure projects, including the Hambentota port.
About half of Sri Lanka’s foreign debt was owed to capital markets. While taking such loans, the repaying capability and the capacity to serve the debt by paying interest was not adequately planned or calculated.
All the past Sri Lankan governments in the last decade or so are responsible for making Sri Lanka debt ridden.
Several of such loan amounts were utilized for projects such as the construction of stadium, Mattala airport, Lotus Tower in Colombo and others, which are non revenue yielding projects.
The Rajapaksa government is largely responsible for such wasted investment.
What Way Out?
Individuals can declare themselves as insolvent and run away. But, countries with millions of people do not have this option and have to find a way out.
If such crisis are not sorted out by good planning and governance, the consequence would be very severe and the mass protest will start and violent incidents will take place, as it has started happening in Sri Lanka. With the debt burden of more than 35 billion US dollars, there is no way that Sri Lanka can repay such debt or service the debt for the next several months.
Obviously ,Sri Lanka need the support from friendly countries to tackle the present crisis. While India has responded with great speed by providing shipload of diesel and other credit, there is a limit beyond which India cannot assist Sri Lanka to overcome the crisis.
In such a situation, the Sri Lankan government should give up the prejudice that it has developed with regard to IMF and some countries, which are rich enough to help Sri Lanka at this stage.
Sri Lanka should realise that its relation with China has only resulted in a scenario, where Sri Lanka has been forced to surrender Hambentota port to China and enter into a debt trap.
There is little in common between China and Sri Lanka, as Sri Lanka is a democratic country and China is a totalitarian regime. Sri Lanka is a country with people devoted to religion such as Buddhism, Hinduism, Christianity, etc. China does not have such regime, which accepts religion as a way of life.
As a matter of fact, in the relation between China and Sri Lanka, China’s gain is much larger than that of Sri Lanka, as the location of Sri Lanka provides several strategic advantages for China in military terms and transportation .
Obviously, Sri Lanka has to become closer to countries like USA, Canada, Japan and European countries, that advocate liberty and freedom in the way that Sri Lanka also does and practice democracy in the way that Sri Lanka does.
In today’s conditions, Sri Lanka certainly needs financial and technological support which only countries like USA and Canada and European countries as well as Japan can provide.
Obviously, this requires that Sri Lanka has to move away from depending on China and cast its eyes elsewhere.
Focus on economics and growth rather than politics in external relations is the only option for Sri Lanka .
Of course, Western countries have been accusing Sri Lanka of human rights violation unjustifiably. This issue can be sorted out by skillful diplomatic move by Sri Lankan government in dealing with USA and European countries.
There are accusations that Sri Lankan government is being governed like a family concern by Rajapaksas. This impression should be removed.
What is needed now is cooperation between all political parties realizing that entire Sri Lanka is now caught in an extremely difficult situation and political upmanship by one political leader or the other would be counterproductive for the whole country.
Let a national government be formed and a task force be appointed to guide the country to overcome the economic crisis in a one year period. Let there be elections after this.