文/Prabhu Mallikarjunan
Editor/Qi Fei
A year and a half ago, the South Asian island nation of Sri Lanka was in the midst of intense turmoil — long queues at petrol stations, empty store shelves, people taking to the streets in protest and police brutal protesters.
People queue up at a gas station in Colombo in June 2022 to refuel. At that time, Sri Lanka was in the midst of an economic crisis and there was a shortage of fuel.
In April 2022, the Sri Lankan government declared bankruptcy, struggling to break out of a moratorium on external debt payments amid political turmoil and a currency crisis. The country's bankruptcy has plunged Sri Lanka into its worst food, fuel and electricity crisis since gaining independence 75 years ago.
Angry people stormed the residence of then-President Gotabaya Rajapaksa and forced him to leave office, and the situation in Sri Lanka took a positive turn. The once chaotic streets have regained their calm and tranquility, gas stations are no longer queuing, and prolonged power outages are a thing of the past.
At the moment, Sri Lankans seem to have survived the toughest of times. The International Monetary Fund's assessment shows that Sri Lanka's economy is turning around after six consecutive quarters of negative growth. Sri Lanka's economy has continued to recover after the organization approved $3 billion in financial aid last March. Under the leadership of current President Ranil Wickremesinghe, Sri Lanka's real gross domestic product (GDP) grew by 1.6% year-on-year in the third quarter of 2023.
Sri Lankan President Ranil Wickremesinghe.
The World Bank said in its Global Economic Prospects report in January this year that Sri Lanka's economy is on track to be on a positive trajectory this year, with GDP expected to grow by 1.7 percent.
Peter Brewer, head of the IMF's high-level delegation to Sri Lanka in Asia and the Pacific, said at a recent press conference: "The shortage of essential goods has eased and inflation is under control. But he also noted that challenges remain, "because these improvements need to translate into improved living conditions for the people of Sri Lanka."
Tuk-tuk drivers have no food a day
While the country's overall economic situation is temporarily relieving, affordability remains a serious challenge in Sri Lanka. For tuk-tuk driver Krishnapilla Muralidharan, life is becoming difficult.
In Jaffna, a tuk-tuk driver in Jaffna, Sri Lanka's Northern Province, is struggling to make ends meet. Photo by Prabhu
Muraliharan, 54, lives in Jaffna, the capital of Sri Lanka's northern province, where the majority of residents are Tamils. He told Phoenix Weekly that the prices of basic household items in the region have increased by two to three times compared to the past. "Half a litre of milk has soared from 60 rupees to 150 rupees (1 Sri Lankan rupee is about 0.022 yuan), the price of rice has doubled from 150 rupees per kilogram, and the price of cooking gas has soared from 1,900 rupees to a staggering 4,750 rupees. ”
The economic crisis has eroded every aspect of life, and the family has gone from three meals a day to two meals a day. His wife, who died of illness seven years ago, leaving behind two school-breaking daughters and a son, is now letting them know that two meals are hard to come by.
As a tuk-tuk driver, Muraliharan faces the dilemma of whether to use a meter: the money he earns from using a meter is simply not enough for his family's expenses, and although he can overcharge for not using a meter, he can also be fined 2,000 Sri Lankan rupees (about 44 yuan) by the police. This has a direct impact on his ability to provide for his family as a single father.
His own health has also made Murali Haran worried. He has diabetes and had been hospitalized for almost a month for surgery. During his hospitalization, his family's income was unsustainable.
According to a 2023 household survey conducted by the Department of Statistics of Sri Lanka, 99.1% of Sri Lankans have seen an increase in their average monthly spending, with the most common reason being an increase in food spending. To combat this, nearly 60% have reduced their food use, while others say they will spend less in proportion to their income.
Akash Moses, national director of the Voice for Voiceless Foundation, a Sri Lankan NGO, told Phoenix that the ongoing crisis has forced people to eat curry and two meals a day. "If in 2022 people are concerned about whether there is enough food, now it is whether they can afford to eat vegetables. The common coping strategy of the population is to survive, and the first thing they need to ensure is the use of electricity and water for their households, not the intake of nutrients. ”
Today, Selwan said, only the wealthy can afford vegetables. Photo by Prabhu
Right now, many middle-class families have slipped below the poverty line. In particular, electricity bills soared by 65 percent last year after various subsidies were removed. According to the World Bank, this is likely to continue for some time. "Poverty in Sri Lanka is expected to remain above 25 percent in the coming years due to multiple risks to household livelihoods," the group said in a report last year. ”
President Ranil Wickremesinghe announced on January 1 this year that "last year's fiscal revenue reached 3.1 trillion rupees, or 12 per cent of GDP." By 2024, we have set a target of Rs.4.2 trillion in fiscal revenue, which will require a VAT amendment. ”
Since January this year, the Sri Lankan government has increased the value added tax (VAT) (the value added tax on goods) to 18% from the previous 15%, and most goods that were previously exempt from VAT are now taxed. This has further exacerbated the challenges faced by low-income people, leading to a rise in debt.
"Prices have soared 300 per cent, but incomes have stagnated. Moses pointed out that the people affected are not limited to low-income groups, and everyone is not immune. He suggested a top-down approach, taxing the rich more and the poor less, but he also argued that implementing these measures would not be easy because of the government's limited budget.
Tamizh Selvan, 38, who runs a vegetable stall in the capital, Colombo, is also facing challenges in his business. He said that now only the rich can afford to eat vegetables, and the poor and middle class have no money to buy vegetables at all.
Vegetable vendors in Colombo wait for customers on the street in March 2023. Source: Reuters
Due to the coronavirus pandemic and the fuel crisis, Servan's previous vegetable retail business struggled and he later became a mobile vendor. He said he lost almost Rs 600 lakh during the crisis and later borrowed Rs 20 million from various sources to make ends meet.
In order to pay off this debt, he found manual labor while selling vegetables. In the past year, his daily income has increased slightly from Rs 2,000 to Rs 3,000.
Originally from Matale in Central Province, Selvan has young children and elderly parents-in-law at home, and as the sole breadwinner of the six-member family, he has to make ends meet. "Don't look at me selling onions all day, but my family can't afford to eat them. He told Phoenix Weekly, "There has been a noticeable increase in daily spending, especially for breakfast, which has increased from Rs 150 to Rs 350. Isn't that strange? The same meal now costs more money. ”
In Colombo, Sri Lanka, Selvan, a vegetable vendor sells onions for a living, but cannot afford to buy them. Photo by Prabhu
He limits his expenses to Rs 500 a day and strives to ensure that everyone in the family eats three meals a day. He shares a flat in Colombo for Rs. 5,000 a month. Mosquito bites caused him some trouble, and mosquito control also cost extra.
Selling the same amount of vegetables now earns twice as much as it used to be, but profits haven't increased, Serwan said. He stressed that while some people are able to guarantee three meals a day, many more are living in the same dire situation as he is.
He expressed doubts that the country's politicians will be able to solve these problems, and "their worries about the lives of the population will only arise when freebies are promised in an election year". He expects that the government may continue to raise taxes after the September elections, which will further burden people like him.
A vegetable market in Nuwara Eliya, Central Province, Sri Lanka, on the weekend, is visited by only a few customers.
There is a brain drain and the healthcare system is in trouble
Sri Lanka's poverty rate rose from 13.1 percent in 2021 to 25.6 percent in 2022, and is expected to remain above 25 percent in the coming years, according to a World Bank brief released in April last year.
While poverty has generally increased across all sectors – the poverty levels of the urban and rural populations have tripled and tripled, reaching 15 per cent and 26 per cent respectively in 2022 – the situation remains worst in the plantation sector (those who live and work in tea, rubber and coffee-producing regions), with the highest levels of poverty and more than half of the population living below the poverty line.
Experts believe that reforms aimed at correcting overall imbalances and promoting long-term recovery and growth could further affect poverty levels in the short term. Abdur Rahim Siddiqui, representative of the United Nations World Food Programme, said: "One of the consequences of poverty is malnutrition. Faced with income constraints, poor families have had to make compromises on food intake, both in quantity and quality. ”
The impact of the crisis has been mixed across various groups of the population, with the food crisis mainly affecting the plantation industry, daily wage earners and households whose main source of income is social assistance programmes. Siddiqui said it was crucial to mitigate the negative impact on the most vulnerable as the country emerges from its economic crisis.
According to the results of the survey conducted by the statistics department, 54.9 per cent of households in Sri Lanka are currently in debt. This means that more than half of households in Sri Lanka have outstanding debts. It is worth noting that 22.3% of the debt came from loans obtained to meet daily food needs, indicating that people are severely underfunded to meet their basic needs. In addition, 17.0% of indebted households took out loans to build or repair their homes.
High debt also makes many people afraid to see a doctor. Government documents in Sri Lanka show that due to the economic crisis, one-third of patients have changed their treatment regimens, and many have changed treatment locations and only started taking drugs when the disease has reached a critical stage.
Charaka Kaviratne previously worked for MAS Holdings, one of the largest fabric sales companies in Colombo, when the economic crisis forced him to look abroad for job opportunities. He applied for a visitor visa to Canada and was granted a work visa.
However, shortly after Cavratni's departure, he was forced to change his plans due to his mother's heart attack. He had just lost his father four years ago. Despite his desire to stay abroad, he eventually chose to return to China to take care of his mother. In addition to heart disease, his mother was diagnosed with bone marrow cancer.
"Although healthcare in Sri Lanka is free, the healthcare system is chaotic and there is a shortage of medicines. Cabellatny told Phoenix. In addition, the indifference of medical staff is also one of the dilemmas that patients face during the treatment process.
Sunimalee Madurawala, an economist at the Sri Lanka Institute for Policy Studies, told Phoenix that the government has made efforts to provide health care, but has not been able to find a comprehensive solution. She sees a dual challenge for the healthcare sector, namely the current economic crisis and the additional pressures of the pandemic.
The pandemic has already exhausted healthcare workers, and the economic crisis has led to further staffing. Maduravala noted that many professionals in the field have to travel abroad to seek job opportunities due to the low pay in the local healthcare sector. As a consequence of staff turnover, junior doctors, both public and private, begin to practice medicine without adequate guidance and supervision from senior doctors.
People are queuing for treatment at a hospital in Colombo. Photo by Prabhu
The situation is further complicated by the recent doctors' strike. Maduravala said that this year coincides with an election year and she is not sure whether decisions about health care are politically motivated or genuinely motivated by concerns about people's well-being. When it comes to the problem of inadequate food intake, Maduravala believes that it is as serious as the medical problem, as Sri Lanka is currently experiencing the highest rate of malnutrition on record, underscoring the severity of the problem.
Last September, President Ranil Wickremesinghe even asked developed countries to compensate Sri Lanka, especially those that had hired its doctors, at a forum. Wickremesinghe bluntly said that less industrialized countries lose their "educated workforce" due to brain drain, leading to economic hardship, and human capital is a key element of any country's development.
The scale of the brain drain has left a worrying gap in Sri Lanka's economic recovery – in addition to medical personnel, the South Asian country also faces a shortage of professionals in many fields, including IT, engineering and clothing. "Many young Sri Lankans return home to find that there is no job for them. Therefore, their only option is to leave the country, thereby depleting the country's human resources. So said many of the country's experts.
As the domestic economy gradually recovers, Sri Lanka's small traders are looking forward to recovering their livelihoods as soon as possible. Photo by Prabhu
The government strives to attract foreign investment and overseas tourists
At the height of the crisis in 2022, Sri Lanka became the first low- and middle-income Asian country to default on its sovereign debt in 20 years. To date, the country still has more than $51 billion in external debt, of which $28 billion must be repaid by 2027.
As the economy hits the path to recovery, the island nation intends to renegotiate its debt restructuring plan with China. Sri Lanka owes about US$6.85 billion in total loans to China, of which the Export-Import Bank of China extended the loan maturity by US$3.992 billion. In addition to the Export-Import Bank's loans, which are classified as bilateral debt, the China Development Bank has also provided a $2 billion term loan to Sri Lanka, while the remaining loans from CDB are classified as "commercial loans."
As recently as October last year, the Sri Lankan government announced a "tentative" agreement with the Export-Import Bank of China on key terms and principles for the debt restructuring, without disclosing full details.
The restructuring of debt comes at a time when China continues to expand its direct investment in Sri Lanka. At the end of November last year, Sri Lanka approved the construction of a US$4.5 billion refinery by China Petroleum & Chemical Corporation in the country's southern port of Hambantota, the largest single investment in Sri Lanka since the economic crisis began in 2022.
Previously, China Merchants Port Co., Ltd. had signed a 99-year lease contract with the Sri Lankan government for the Hambantota Port and a contract for the construction of a port logistics and warehousing center worth US$392 million.
Sri Lankan Prime Minister Wickreme Singh addressed the business community in Davos in January, calling on investors to find investment opportunities through public-private partnerships in areas such as renewable energy, agricultural modernization, tourism, IT and infrastructure development. In his recent speech on the budget, he proposed the establishment of new investment zones in Hambantota, Jaffna, Trincomalee, Bingiriya and Kandy. To address the concerns of foreign investors, the Sri Lankan government has pledged to remove various investment restrictions and move forward with ongoing economic reforms.
In terms of tourism, the Sri Lankan government plans to attract tourists with higher spending levels. In 2023, Sri Lanka will attract nearly 1.5 million overseas tourists, and foreign exchange earnings from the tourism industry are expected to exceed US$2 billion. In the first 15 days of January 2024, more than 100,000 tourists visited the country, double the number of tourists compared to the same period in 2023.
As tourism gradually recovers, Sri Lanka aims to attract 2.3 million overseas tourists by 2024 and aims to attract more Chinese tourists. As a result, the government has until March 31, 2024, to issue free entry travel permits to Chinese citizens. With this permit, incoming tourists can enter Sri Lanka twice within 30 days. Chinthaka Liyanaarachchi, head of the China market at the Sri Lanka Tourism Board, said that based on the number of bookings so far, the number of Chinese tourists visiting Sri Lanka in 2024 is expected to reach 500,000.
At the end of last year, the Sri Lanka Tourism Board successively launched a series of roadshows in Hangzhou, Chengdu, Shenzhen and other places in China, not only launching a new brand slogan: "Sri Lanka, you will come again!" It also introduced the rich and colorful leisure and MICE tourism resources of the local area as the "Pearl of the Indian Ocean" of the enthusiastic island country, and actively seized the market share of China's outbound tourism.
In addition, the Sri Lankan government has arrested nearly 30,000 people through an anti-drug operation codenamed "Justice". A number of UN human rights experts expressed dissatisfaction with the move, arguing that the police were inappropriate to arbitrarily arrest thousands of suspects from marginalized groups and detain hundreds of them in military-run compulsory rehabilitation centres, and called on the government to take comprehensive and effective measures to address the drug problem.
Ravi Rannan Eliya, a Sri Lankan economist and executive director of the Health Policy Institute, argues that Sri Lanka's ruling class, both the ruling party and the opposition, have countered the widespread misconception that the economic crisis is due to excessive government spending on welfare.
At its meeting on January 19, the International Monetary Fund (IMF) said that maintaining the momentum for reform and ensuring that all projects are implemented in a timely manner is essential to rebuild confidence and build the recovery on a solid foundation that benefits everyone. The group warned that while the implementation of domestic debt restructuring is an important milestone, it remains critical to quickly complete agreements with official creditors and reach a settlement with external private creditors.
"Accelerating the collection of progressive property taxes is key to ensuring that the burden is shared fairly while maintaining income-based consolidation. "The new tax policy should be accompanied by a need to strengthen tax administration and combat tax evasion to make the reforms more sustainable." ”
(Translation: Zhu Zhaoping)