A few years ago, Sri Lanka had an economy strong enough to provide jobs and financial security for its 22 million people
Chamila Nilanthi is tired of all the waiting. The 47-year-old mother of two spent three days lining up to get kerosene in the Sri Lankan town of Gampaha, northeast of the capital, Colombo. Two weeks earlier she spent three days in a queue for cooking gas — but came home with none.
“I am totally fed up, exhausted,’’ she said. “I don’t know how long we have to do this.’’
A few years ago Sri Lanka’s economy was growing strongly enough to provide jobs and financial security for most. It’s now in a state of collapse, dependent on aid from India and other countries as its leaders desperately try to negotiate a bailout with the International Monetary Fund.
The collapse has brought political turmoil and protests demanding the resignations of both Prime Minister Ranil Wickremesinghe and President Gotabaya Rajapaksa. Wickremesinghe agreed Saturday to resign as protesters stormed the president’s residence, saying he would leave office when all parties have agreed on a new government.
What’s happening in this South Asian island nation of 22 million is worse than the usual financial crises seen in the developing world: It’s a complete economic breakdown that has left people struggling to buy food, fuel and other necessities and resulted in unrest and violence.
“It really is veering quickly into a humanitarian crisis,’’ said Scott Morris, a senior fellow at the Center for Global Development in Washington.
Such disasters are more commonly seen in poorer countries, in sub-Saharan Africa or in war-torn Afghanistan. In middle-income countries such as Sri Lanka, they are rarer but not unheard of: 6 million Venezuelans have fled their oil-rich country to escape a seemingly unending political crisis that has devastated the economy.
Indonesia, once touted as an “Asian Tiger’’ economy, endured Depression-level deprivation in the late 1990s that led to riots and political unrest and swept away a strongman who had held power for three decades. The country now is a democracy and a member of the Group of 20 biggest industrial economies.
Sri Lanka’s crisis is largely the result of staggering economic mismanagement combined with fallout from the pandemic, which along with 2019 terrorism attacks devastated its important tourism industry. The coronavirus crisis also disrupted the flow of remittances from Sri Lankans working abroad.
The government took on big debts and slashed taxes in 2019, depleting the treasury just as COVID-19 hit. Foreign exchange reserves plummeted, leaving Sri Lanka unable to pay for imports or defend its beleaguered currency, the rupee.
Ordinary Sri Lankans — especially the poor — are paying the price. They wait for days for cooking gas and petrol in lines that can extend more than 2 kilometers (1.2 miles). Sometimes, like Chamila Nilanthi, they go home with nothing.
At least 16 people have died so far waiting for gasoline. One was a 63-year-old man found inside his vehicle on the outskirts of Colombo. Unable to get fuel, some have given up driving and resorted to bicycles or public transportation to get around.
The government has closed urban schools and some universities and is giving civil servants every Friday off for three months to conserve fuel and allow them time to grow their own fruit and vegetables.
Food price inflation is running at 57%, according to government data, and 70% of Sri Lankan households surveyed by UNICEF last month reported cutting back on food consumption. Many families rely on government rice handouts and donations from charities and generous individuals.
Unable to find cooking gas, many Sri Lankans are turning to kerosene stoves or cooking over open fires.
Affluent families can use electric induction ovens for cooking, unless the power is out. But most Sri Lankans can’t afford those stoves or higher electric bills.
Sri Lankans furious over fuel shortages have staged protests, blocked roads and confronted police. Fights have broken out when some try to jump ahead in fuel lines. Police have attacked unruly crowds.
One night in June, a soldier was seen assaulting a police officer at a fuel station in a dispute over gasoline distribution. The police officer was hospitalized. The police and military are separately investigating the incident.
The crisis is a crushing blow to Sri Lanka’s middle class, estimated to account for 15% to 20% of the country’s urban population. Until it all came apart, they enjoyed financial security and increasing standards of living.
Such a reversal is not unprecedented. In fact, it looks like what happened to Indonesia in the late 1990s.
The U.S. Agency for International Development — which runs aid projects for poor countries — was preparing to close up shop in the Indonesian capital, Jakarta; the country didn’t seem to need the help. “As one of the Asian Tigers, it had worked its way off the aid list,’’ said Jackie Pomeroy, an economist who worked on a USAID project in the Indonesian government before joining the World Bank in Jakarta.
But then a financial crisis — triggered when Thailand suddenly devalued its currency in July 1997 to combat speculators — swept across East Asia. Plagued by widespread corruption and weak banks, Indonesia was hit especially hard. Its currency plummeted against the U.S. dollar, forcing Indonesian companies to cough up more rupiahs to pay back dollar-denominated loans.
Businesses closed. Unemployment soared. Desperate city dwellers returned to the countryside where they could grow their own food. The Indonesian economy shrank more than 13% in 1998, a Depression-level performance.
Desperation turned to rage and demonstrations against the government of Suharto, who had ruled Indonesia with an iron fist since 1968. “It very quickly rolled into scenes of political unrest,’’ Pomeroy said. “It became an issue of political transition and Suharto.’’ The dictator was forced out in May 1998, ending autocratic rule.
Although they live in a democracy, many Sri Lankans blame the politically dominant Rajapaksa family for the disaster. “It’s their fault, but we have to suffer for their mistakes,” said Ranjana Padmasiri, who works as a clerk at a private firm.
Prominent Rajapaksas have resigned — former Prime Minister Mahinda Rajapaksa and Basil Rajapaksa, who was finance minister. Protesters demanding that President Rajapaksa also step down have camped outside his office in Colombo for more than two months.
Resignation, Padmasiri said, isn’t enough. “They can’t get away easily,’’ he said. “They must be held responsible for this crisis.’’
Wiseman reported from Washington.