Sri Lanka has not repaid its foreign debt amid economic and humanitarian crises

Colombo, Sri Lanka – Sri Lanka announced on Tuesday that it would suspend payments on its foreign debt, highlighting rising inflation, large-scale protests and the crisis facing the government struggling to contain the humanitarian catastrophe on the 22nd island. Millions of people.

Although the announcement marks Sri Lanka’s first default since independence in 1948, the move is highly anticipated by international markets, especially as the country has struggled to import fuel, food and medicine as its foreign exchange reserves have dwindled in recent months. Tens of thousands of angry protesters have taken to the streets for weeks from the coastal capital, Colombo, to the central highlands, demanding the resignation of President Gotabhaya Rajapakse. His family has maintained an iron grip on island politics in the past. Decade.

The Rajapakse government, led by Gotabhaya Rajapakse and his brother, Prime Minister Mahinda Rajapakse, is seeking bail from the International Monetary Fund at a meeting in Washington next week. Its economic group, which was recently restructured under mounting public pressure, has said it is taking steps, including raising interest rates and devaluing the Sri Lankan rupee, to convince international lenders that Sri Lanka can resume repayments if given time to contain the recession. .

Sri Lanka’s external debt totals $ 51 billion, and about $ 7 billion this year. Many international economists, including those in the International Monetary Fund, have urged Sri Lanka to negotiate with its debtors – private owners such as the Asian Development Bank, Japan, China and BlackRock.

“As a result of the COVID-19 epidemic and hostility in Ukraine, Sri Lanka’s financial position has been severely eroded and it is not possible to resume regular service duties,” the finance ministry said in a statement. “The government has taken extraordinary steps to prevent this from happening, but it is now clear that further delays could lead to permanent damage to the Sri Lankan economy.”

Murtaza Jaffarji, chairman of the Independent Advocate Think Tank in Colombo, said the Rajapakse government had been “in denial” for years as the country’s economy collapsed.

Rajapakse announced steep tax cuts – a promise he made during his 2019 campaign – as Sri Lanka’s trade deficit narrowed in recent years as tourism, a key source of foreign currency, evaporated during the corona virus epidemic. As Sri Lanka’s dollar reserves dried up and inflation began to bite, food prices soared by 30 percent, with residents carrying the lines of petrol stations that last for hours each day. In recent days, some officials have warned of the possibility of mass starvation.

Jaffarji said the people of Sri Lanka “have made sacrifices until the reserves are completely exhausted and this must be done.” “People are in a terrible state.”

The only consolation is that Rajapaksa recently “set up a decisive economic group that is really throwing the kitchen sink in trouble,” Jafferji added.

Rajapaksa, whose younger brother Basil previously served as finance minister, rocked his cabinet on April 4 and three days later appointed three trained economists to the Economic Advisory Council. The government recently announced measures such as drastically raising interest rates and cutting government spending.

In an interview prior to the default announcement, Finance Minister Ali Sabri, who was appointed by Rajapakse to replace his brother on April 4, said he did not believe Sri Lanka would face food and drug shortages and that the government was in talks with various parties. Organizations including the World Health Organization and neighboring countries such as India are concerned about emergency supplies in the event of a crisis.

Sabri said he was in talks with international lenders and foreign governments to delay lending and provide material assistance in the event of a food or drug shortage and hoped the country would not recover from the downturn. “No one benefits from the worsening situation in Sri Lanka,” he said.

However, the government’s recent moves have not silenced opposition politicians who are demanding that Rajapakse be stripped of his presidential powers — or that he and his family, who maintain a majority of supporters in parliament, leave the political scene. Political and economic observers say the stalemate has led to uncertainty over who can lead Sri Lanka in the future, confusing international lenders as they seek to promote Sri Lankan stability.

In a televised address on Monday night, the country’s No. 2 leader, Mahinda Rajapaksa, urged citizens to be “patient” and said the Rajapaksa family was ready to “bear” the anger of the public. As president in 2009, Mahinda Rajapakse, known as the strongman who ended the decades-long civil war by ruthlessly crushing the Tamil separatist movement, expressed no intention of resigning, but sounded a note of tolerance as he promised to step down. Protesters should not take action against his security forces unless they “harass” him.

“Remember that today you are fighting on the streets without fear of repression because those warriors sacrificed their lives to save this country for you,” he urged citizens to go home. “Friends, every moment you fight on the streets, our country loses potential dollars.”

It is unknown at this time what he will do after leaving the post. For several days, protesters marched day and night in front of the president’s office in central Colombo, carrying banners and chanting slogans calling on the Rajapakse family to “go home” and return the money they allegedly stole to the Sri Lankan people.

On Saturday, the watershed overflowed as mostly urban professionals expressed their frustration. Among the protesters was 64-year-old Ray Anthony, who said he could not survive on $ 100 a month serving tea at a technology company before losing his job last year.

He has given up the idea of ​​eating meat and coconut as the prices of food items have skyrocketed. As fuel prices rise, he abandons cooking with gas and wanders in search of firewood instead.

“I was able to cope before the crisis,” he said. “Today, I’m lost.”

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