Worldview with Suhasini Haidar | How can India help Sri Lanka?
The Hindu
This week on Worldview, we discuss Sri Lanka’s economic crisis and India can help its neighbour
Scenes from Colombo just outside the President’s House stunned all last week- as protesters vented their anger over the economic situation they blame the Rajapaksa government- led by President Gotabaya and his brother Prime Minister Mahinda Rajapkasa for. The worry for both Sri Lanka, as well as India and the regional economy- is Sri Lanka’s economy headed for a crash?
Lets just take a look at what fuelled the rage:
1. Sri Lanka’s food inflation in March rose to 30.2 percent- over prices one year ago. Just as examples, the price of rice, has increased by 93 percent since 2019. Chicken and lentils have gone up by at least 55 and 117 percent, respectively, since 2019.
2. Fuel prices and fuel shortages: In March the Ceylon Petroleum corporation quadrupled the cost of Petrol and Diesel with Petrol going from 77 Sri Lankan Rupees to Rupees 254 overnight. An Indian credit line for fuel purchases is set to end at the end of the month, and all diesel supplies may run out after that.
3. Sri Lankan Rupees plunged to become the world’s worst performing currency after the central bank devalued it by 15% in March, and it has since dropped from 200 rupees down to 310 rupees to the Dollar, about 400 rupees on the black market
4. With the country’s debts mounting past $51 billion, with about $ 7 billion due this year, there is a real worry of a debt default, which could send the economy into a further free fall.
5. Sri Lanka’s major wage earners, tourism, export and worker remittances, have been in a downward-spiral for some time. The Easter bombings, the COVID-19 pandemic, and now the shortages, economic strife and political instability will add to the problem. Remittances from abroad have also dropped 25% due to the global economic downturn, and now the Ukraine war. In addition rising impact of climate change on fishing, as well as the intrusion of Indian trawlers in Sri Lanka’s northern sea, which is another big blow to Sri Lanka’s poorest.
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