Going Nowhere

The Sri Lankan economy continues to go downhill and there is not much hope in sight for it to get back on rails.

By Salis Malik | July 2022

In the socio-economic predicament of Sri Lanka, the new Prime Minister, Ranil Wickremesinghe, has been appointed once again. He takes the reins of the country for the sixth time after the previous Prime Minister Mahinda Rajapaksa gave in to mass riots and resigned from office. Even after five previous stints as prime minister of the country and having a considerate political experience under his belt, the incumbent prime minister now finds himself ensnared by myriad constraints.

The biggest challenge he has to deal with is the perpetually eroding economy, which is already in a shambles. The foreign loans accumulated by Sri Lanka amount to a total of 50 billion dollars. This mountain of foreign loans has led to a plethora of complications in several economic processes as the country’s limited revenue will be used for the servicing of these loans. This has further thwarted the already dwindling economy by stopping various developmental initiatives such as work on infrastructure, health and education.

As the country struggles with its dollar crunch, more import curbs and capital control will be implemented, which will further destroy the economy. In the midst of having a severe food shortage and the perpetual free fall of the rupee, Sri Lanka becomes the first Asia-Pacific country to default on foreign debt. The massive amount of trade and fiscal deficit tells the real story behind the default status of Sri Lanka. When Gotabaya came into power in 2019, his policies further acted as the catalyst which led to the disintegration of Sri Lanka. It was Gotabaya who slashed taxes, forcing the government to purchase dollar reserves. These ambitious policies actually were disaster.

Apart from the failing economy, the prime minister also faces problems in the form of political uncertainty. Wickremesinghe, for the record, has never completed a single term in all five of his previous stints as Prime Minister. Therefore, even after his recent new appointment, political uncertainty continues.

This uncertainty is not only for the new PM but for the entire government of Sri Lanka as protests have not yet seized. What is even more surprising is the fact that the Prime Minister is close to the Rajapaksa family even though when in the opposition. It seems power still resides in the hands of the Rajapaksa dynasty and the problems that drove Sri Lanka to its present state would continue.

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