HomeWorldLive updates: Sri Lanka in crisis after president flees

Live updates: Sri Lanka in crisis after president flees

A man carries a liquefied petroleum gas cylinder after collecting it from a distribution point in Colombo, Sri Lanka, on July 12. (Arun Sankar/AFP/Getty Images)

Sri Lanka, an island nation of 22 million, is enduring its worst financial crisis since gaining independence in 1948.

Crippling inflation is driving up the cost of basic goods. Its foreign exchange reserves plummeted to record lows, and dollars ran out to pay for essential imports, including food, medicine and fuel.

Government ministers have resigned en masse and Sri Lankans have taken to the streets in protest as the crisis has turned their daily lives into an endless cycle of waiting in lines for basic goods, many of which are being rationed.

Despite previous government efforts to ease the crisis, such as the introduction of a four-day working week, then-Prime Minister Wickremesinghe declared the country “bankrupt” last Tuesday.

In several major cities, including the capital Colombo, desperate residents continue to queue for food and medicine, with reports of clashes between civilians and police and military as they wait in line.
In early July, Energy Minister Kanchana Wijesekera said the country had less than a day’s worth of fuel left.
Trains have been reduced in frequency, forcing commuters to squeeze into compartments and even sit precariously on top of them as they commute to work.
Patients are unable to travel to hospitals due to fuel shortages and food prices are skyrocketing. Rice, a staple food in the South Asian nation, has disappeared from the shelves of many stores and supermarkets.

How we got here: The crisis has been years in the making, experts said, pointing to a series of government decisions that have compounded external shocks.

Over the past decade, the Sri Lankan government has borrowed large sums from foreign lenders to finance public services, said Murtaza Jafferjee, president of the Colombo-based think tank Advocata Institute.

This wave of lending has coincided with a series of hammer blows to the Sri Lankan economy, from natural disasters such as strong monsoons to man-made catastrophes, including a government ban on chemical fertilizers that decimated farmers’ harvests.

Faced with a massive deficit, President Gotabaya Rajapaksa cut taxes in a failed attempt to stimulate the economy.

But the move backfired, hurting government revenue instead. That prompted ratings agencies to downgrade Sri Lanka to near-default levels, meaning the country lost access to foreign markets.

Sri Lanka then had to draw on its foreign exchange reserves to pay off government debt, drawing down its reserves. This affected imports of fuel and other essential items, sending prices skyrocketing.

On top of all that, the government in March floated the Sri Lankan rupee, meaning its price was determined based on the demand and supply of the foreign exchange markets.

However, the rupiah’s decline against the US dollar only made things worse for Sri Lankans.

Public frustration and anger boiled over on March 31, when protesters threw bricks and set fires outside the president’s private residence. On Saturday, protests erupted when people stormed the residence, calling for his resignation. In the latest developments, President Rajapaksa fled to the Maldives and Prime Minister Wickremesinghe was appointed interim president. Currently, Sri Lankans continue to protest in the streets and there is much uncertainty as to who is in charge and what will be the outcome of this unrest.

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