In the early morning of July 10, local time, Sri Lankan President Tabaya Rajapaksa has informed Speaker Abawadna that he will resign as president on July 13. Earlier in the day, the Sri Lankan Prime Minister's Office issued a statement saying that Sri Lankan Prime Minister Viklamasingha was willing to resign.
On July 9, sri Lanka's capital, Colombo, erupted in the largest recent demonstration. Demonstrators stormed the Presidential Residence, the Presidential Office and the Prime Minister's Office. Late on the night of the 9th, a large number of demonstrators set fire to the prime minister's official residence. The Chinese Embassy in Sri Lanka released a message on the 9th, reminding Chinese citizens in Sri Lanka to strengthen security precautions.
↑On July 9, local time, the largest recent demonstration broke out in Colombo, Sri Lanka, and demonstrators rushed into the presidential residence
In recent months, Sri Lanka has been facing a shortage of foreign exchange, high prices, and tight electricity and oil supply, with protesters protesting one after another demanding that the government quickly resolve the country's economic crisis. Public anger and protests forced former Prime Minister Mahinda Rajapaksa to step down on May 9, but as time went on, the biggest crisis in 70 years did not get any better, and in June, Prime Minister Vikramasingha said "Sri Lanka's economy has completely collapsed." On July 6, he told parliament that "the country is bankrupt."
Some analysts believe that Sri Lanka's plight has shown the world that the Russian-Ukrainian conflict is putting some fragile developing economies in danger. A Russian-Ukrainian conflict has not only triggered refugee flows in Ukraine's neighboring countries, a global energy supply crisis and financial market turmoil, but has also made a seemingly unrelated island nation far away in the Indian Ocean a "epicenter", and Sri Lanka may not be the only one.
The Russian-Ukrainian conflict pushed it off a cliff
Over the past few months, Sri Lanka has been mired in a "whirlpool of economic death", with the economic situation "worsening week by week".
Sri Lanka, which has a reported population of about 22 million, is completely dependent on imports for important commodities such as medicines and fuel. However, under the double impact of the new crown epidemic and the Conflict between Russia and Ukraine, global commodity prices have soared, causing the Highly Imported South Asian Island Nation to suffer from insufficient foreign exchange reserves, resulting in a serious shortage of fuel, coal, milk powder and other daily necessities.
For Sri Lankans facing the collapse of the country's economy, survival has also become a challenge. The World Food Programme said on June 24 that a quarter of Sri Lanka's total population, or more than 6 million people, was in the trap of "not knowing where the next meal would come from."
↑ On June 24, a staff member of the engineering service of the Sri Lankan parliament planted vegetables at home to prevent a food shortage
The analysis points out that Sri Lanka's step-by-step state of complete collapse is caused by many unique circumstances and internal factors. However, the country's shocking collapse is also inextricably linked to a wider and interrelated set of global phenomena, such as the Russian-Ukrainian conflict, which led to soaring global food and energy prices and pushed an already struggling Sri Lanka to the brink of a cliff.
Earlier this year, as countries around the world opened their borders one after another, Sri Lanka ushered in a long-awaited post-pandemic recovery in tourism. At present, about 30% of tourists this year come from Russia, Ukraine, Poland and Belarus, and the conflict at the end of February cut off tourists from these countries.
Sri Lanka has reportedly spent millions of dollars on tourism infrastructure for more than 30 years, seeking ways to rebuild its economy, with official figures showing that Sri Lanka's tourism revenue was $3.6 billion in 2019, but in the two years since the pandemic hit the pandemic, its tourism revenue has fallen to less than one-fifth of what it did in 2019.
↑ On April 2, in Colombo, Sri Lanka, people lined up at a fuel pumping station with empty tanks to buy fuel.
After the outbreak of the Russian-Ukrainian conflict, Sri Lanka has been trying to avoid debt defaults due to the decline in foreign exchange reserves. In order to control the domestic economic situation, the government decided to raise interest rates, devalued the currency, and restricted unnecessary imports. In addition to raising borrowing costs and devaluing the Sri Lankan rupee, former Central Bank Governor Cabral urged the government to limit the import of about 300 non-essential commodities such as electronic appliances and apple products, and raise domestic fuel and electricity prices. "In the face of this unprecedented global crisis, the government seems to be actively responding to it, which is helping to guide the economy to stabilise," Cabral said. ”
In fact, as early as March 2020, in order to preserve foreign exchange reserves, the Sri Lankan government issued a broad import ban, triggering a shortage of key commodities. Milk powder, sugar, lentils and other critical supplies in supermarkets are rationed. Last year, the Sri Lankan government banned the import of fertilizers in an organic farming program, leading to nutrient shortages, crop failures and protests, forcing the government to overturn the decision in November.
On May 19, however, Sri Lanka was still unable to avoid defaulting on its sovereign debt for the first time since independence. The inability to pay interest on $78 million of maturing debt triggered a sovereign debt crisis. According to CCTV News, Sri Lanka's available foreign exchange reserves at the time were less than $50 million, while the external debt was already as high as $51 billion, and the country's economic crisis would continue for at least two years.
Before both the prime minister and the president announced their resignations, the country's fuel was almost exhausted, and food inflation soared to 80 percent. Due to fuel shortages, power outages are also prolonging. In March, Sri Lanka began a 7-hour daily blackout. On March 31, sri Lankan authorities announced a 13-hour power outage a day, seriously affecting people's work and life.
↑ Schematic diagram of changes in oil prices in Sri Lanka
By the end of last week, Sri Lankan government officials said there was not enough fuel left to sustain basic services such as buses, trains and medical vehicles, and the country's 22 million residents were required to work from home. Sri Lanka has reportedly announced that it will stop selling fuel to ordinary people from July 10, becoming the world's first country to "cut off oil" since the 1970s.
Alan Keenan, an analyst at the International Crisis Group, said: "Even without the Russian-Ukrainian conflict, Sri Lanka would be in crisis. But the Russian-Ukrainian conflict has exacerbated the situation, which is the so-called "Ukraine effect", that is, the fuel credit line that could have been maintained for two months can now only be maintained for one month. Even with relief, less food, fuel and medicines can be bought.
Russia-Ukraine conflict affects "fragile economies" Sri Lanka is not the only one
Beginning On June 20, the Sri Lankan government held 10 days of negotiations with the International Monetary Fund on a possible bailout plan. Talks ended last week, but no agreement was reached.
Vikramasingha said on Tuesday, "In the past, we had discussions as developing countries. But now it's different. We are now participating in the negotiations as an insolvent State. As a result, we have to face a more difficult and complex situation. ”
It is reported that the Sri Lankan government has previously believed that some of the IMF's loan conditions are too harsh to deal with the agency. Prior to the Russian-Ukrainian conflict, Sri Lanka also approached Asian countries to discuss bilateral credit lines to avoid receiving bailouts from the International Monetary Fund. At that time, a day after Sri Lanka's finance minister visited India, India's Ministry of Foreign Affairs announced on social media that the National Bank of India and the Sri Lankan government had signed a $1 billion credit agreement for the purchase of food, medicine and other necessities.
↑ April 3, Colombo, Sri Lanka, Sri Lanka's economic crisis triggered mass protests.
However, with the outbreak of the Russian-Ukrainian conflict, the Sri Lankan government finally turned to the International Monetary Fund for help, and President Rajapaksa promised to fulfill his obligations. Kenneth Akintwe, the IMF's head of Asian sovereign debt in Singapore, has previously said sri Lanka is heavily indebted and needs to restructure its domestic economic system. But "the country has no history of default, which also means they have no experience of restructuring." ”
Economist Anko Shukla said: "The Conflict between Russia and Ukraine has exacerbated the already fragile external balance in Sri Lanka and widened the gap between external funding needs and available sources of funding. In South Asia, other vulnerable countries, including Bangladesh, Maldives and Nepal, have little direct trade and financial ties to Russia and Ukraine, but "the impact of rising prices and supply chain shortages is enormous," Shukla also said. ”
Some analysts believe that the crisis in Sri Lanka has also shown the world that the Conflict between Russia and Ukraine is putting some fragile developing economies at risk and has hit millions of people who have been working hard for decades to lift themselves out of poverty.
In June, Vikramasinghe also lamented in an interview that the Russian-Ukrainian conflict had accelerated Sri Lanka's economic collapse. He also warned that Sri Lanka would not be the only or last to "fall." "I think by the end of the year you'll see the impact on other countries," he said. ”
A joint report released in May by the international humanitarian organizations Oxfam and Save the Children found that the Conflict between Russia and Ukraine has led to food prices soaring to "record levels" and leaving millions of people in eastern Africa without access to food. In drought-ravaged Kenya, Ethiopia and Somalia, one person dies of starvation every 48 seconds.
Red Star News reporter Xu Huan intern Guo Yue
Edited by Zhang Xun
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