COLOMBO, Sri Lanka — Only lentils, rice and tea without milk. Meals are getting meager for Sandamali Purnima, a Sri Lankan salon worker, her husband with the taxi driver and their four young children. With cooking gas that is hard to find and the electricity is out, she cooks this basic fare outside over wood-fed flames.
A staircase in their suburban home leads to an unfinished second floor, whose concrete prices are too high to continue.
“Building a house is difficult,” said Ms. Purnima. “But eating is even harder.”
An economic crisis is disrupting life in Sri Lanka, an island nation off the south coast of India that has only recently outperformed its neighbors.
In less than a decade, Sri Lanka recovered from the ravages of a civil war that ended in 2009, and rose to the status of an upper-middle-income country. It built a tourism-based economy that provided billions of dollars, many jobs and comforts for the middle class: high-end eateries and cafes, imported Jeeps and Audis and luxury shopping malls.
Now Sri Lankans just want the lights to stay on.
The country’s massive debt burden, the pandemic and, most recently, the war in Europe have brought the country to its knees.
The central bank is printing rupees and hoarding dollars, pushing inflation to a record high of 17.5 percent in February. The finance minister begs neighbors for lines of credit to buy diesel fuel and milk powder. In an exchange agreement, the central bank pays Iranian oil with tea leaves.
For months, the government of President Gotabaya Rajapaksa has been rationing power. Parts of the capital, Colombo, suddenly darken, the city streets turning as inky black as the Indian Ocean next door.
“We’ve really hit rock bottom,” said Paikiasothy Saravanamuttu, the founder and executive director of the Colombo-based Center for Policy Alternatives.
Then he paused and admitted that many believe the situation could get worse. “The question on everyone’s mind is, when is this absolutely going to crash?”
When Mr Rajapaksa won elections in 2019, just months after the Easter Sunday terrorist attacks that killed more than 250 people on the island, he had campaigned to restore the security of the nation, relying in part on his reputation as a ruthless Minister of Defence. who had helped end the long civil war in Sri Lanka.
His campaign didn’t have to worry about name recognition either, as the Rajapaksa family was well known by all Sri Lankans. His brother, Mahinda Rajapaksa, was the war president of Sri Lanka and is now prime minister. As the top commanders of an army accused of widespread atrocities during the civil war, including indiscriminate bombing of civilians on the breakaway Jaffna Peninsula in the north of the country, both men have been charged with war crimes by victims’ families and human rights groups.
Since becoming president, Gotabaya Rajapaksa has only cemented his reputation as a strongman by incarcerating opponents and dissidents.
But as the economy deteriorated under his watch, the pressure on him to ease the suffering mounts.
Two men died in long lines for fuel on sweltering days this week.
The supply shortages kicked off the biggest demonstration in Sri Lanka in years earlier this month, with a series of candlelight vigils protesting the rampant power outage.
The president, a former military officer, responded by sending troops to gas stations on Tuesday to quell public unrest.
The Russian invasion of Ukraine and the coronavirus outbreak in China have disrupted supply chains and pushed up the cost of goods worldwide. In Sri Lanka, however, external unrest has only exacerbated a long-standing problem.
During Mahinda Rajapaksa’s presidency from 2005 to 2015, Sri Lanka took on huge amounts of expensive debt, intended to help transform the country into another Singapore by building ambitious infrastructure projects, including ports. But so far, many of those projects have stalled because they haven’t attracted the private investment the government had hoped for.
This saddled the next government, led by a non-Rajapaksa president, Maithripala Sirisena, with high-interest loans. But his administration managed to convert the expensive short-term loans into cheaper, longer-term debt, building foreign reserves to some $7.5 billion. Sri Lanka had a budget surplus for the first time in 52 years.
Then Gotabaya Rajapaksa came to power and implemented a sweeping tax cut just before the pandemic. Now, for the first time in its history, Sri Lanka is posting negative foreign assets and the interest rate on its government debt has risen from 7 percent to 16 percent.
Sri Lankans don’t have access to dollars, which means they have a hard time traveling or protecting themselves against the rapid devaluation of the local currency, the rupee. Commodities such as food and fuel are either unavailable or exorbitantly priced.
The country essentially lives by word of mouth and is increasingly dependent on foreign aid, tarnishing Sri Lanka’s self-image as a rising economic star.
India recently gave Sri Lanka a $1.5 billion credit line to get out of a fuel crisis, and China is considering a $2.5 billion credit line. The country’s ambassador to Sri Lanka told reporters this week. The government has even turned to poorer neighbors like Bangladesh for credit lines.
“We have nothing else to buy fuel,” said Shehan Semasinghe, a lawmaker and minister of domestic economy. “Our main goal is to get fuel, essential goods and medicines.”
And not only fuel and medicines are scarce, but also the most essential necessity: food.
Due to a poorly executed plan to cut imports by going organic, Sri Lankan farmers were short of fertilizer this growing season, resulting in a lack of the country’s staple food, rice. China donated a million tons and Sri Lanka agreed to pay too high a price for more from Myanmar.
The government has closed embassies abroad, marketed prime real estate, planned power outages and converted the dollars its citizens had stored in banks into Sri Lankan rupees.
But these emergency measures by President Rajapaksa and his finance minister — another brother, Basil Rajapaksa — are unlikely to come close to meeting the mounting debt to China and other major lenders, economic experts say.
“Sri Lanka’s economy is battling multiple organ failure and sepsis has struck,” said Murtaza Jafferjee, president of the Advocata Institute, a think tank in Colombo.
Rating agencies have lowered Sri Lanka’s creditworthiness by several steps and investors are betting on default.
The government has responded with a mix of outrage, disbelief and denial to the rating agency downgrades and harsh analysis, initially resisting calls to seek help from the International Monetary Fund.
However, Basil Rajapaksa admitted earlier this month, saying the country would work with the IMF
Officials are betting that a massive uptick in tourism, whose revenues were 62 percent lower in December than the year before, could restore the country’s balance sheet.
“We know that this problem we’re dealing with is mainly due to the lack of tourist revenue. If the tourist revenues had been there, despite the Covid debacle, no one would have mentioned the IMF,” said Sri Lankan central bank governor Ajith Nivard Cabraal.
Far less optimistic ministers have been fired by the Rajapaksa government.
With its creditworthiness shot, the government buys oil and gas at bargain prices, ie at the prevailing rate when container ships enter the port. Recently, when a tanker docked outside Colombo, the price of its diesel cargo rose from $35 million to $50 million.
As the economic pain mounts, the political opposition to the Rajapaksa sees an opportunity.
Earlier this month, Sajith Premadasa, the opposition lawmaker who lost the 2019 elections to Mr. Rajapaksa, staged a demonstration that raged in Colombo. Tens of thousands of protesters marched to the president’s office and demanded that he resign, wearing headscarves in Sinhala, Tamil and English that read ‘Gota, go’, referring to the president’s nickname.
In another recent protest, Ms. Purnima, 42, joined dozens of other women who marched to the presidential mansion in Colombo to protest the frequent power cuts, the disappearance of cooking gas and powdered milk and the rising cost of fresh food.
“Life is very difficult right now,” she said.
Aanya Wipulasena reporting contributed.
