How Sri Lanka’s unprecedented crisis is unfolding on the ground – The Indian Express

From crippling power cuts and a scarcity of essential commodities, to long queues at fuel pumps and a complete disruption of day to day life, Sri Lanka is facing an unprecedented economic crisis. Last week, Indian Express National Editor of Strategic Affairs Nirupama Subramanian, who has been covering the country since the 90s, was in Colombo to see how the crisis was folding.

In this episode, she joins host Shashank Bhargava to talk about what she saw, what has led to this crisis, and the challenge that the present government faces.

TRANSCRIPT

Shashank Bhargava: Hi, Im Shashank Bharagava,, and youre listening to three things The Indian Express new show. If you have been following the news, then you know that Sri Lanka right now is facing an unprecedented economic crisis, except for Afghanistan. No other country in South Asia has ever experienced such a crisis in the past 75 years. Sri Lankans currently are facing crippling power cuts scarcity of essential commodities, including medicines, and are having to stand in long queues at fuel pumps, because diesel is an extremely short supply. Now this economic crisis has also led to a major political crisis with massive protests taking place in Sri Lankas capital. Students, teachers, lawyers, doctors and those from a whole range of other professions are all demanding that the President Gotabaya Rajapaksa should resign. One slogan that has become really popular among people is Gota go home.

Last week, Indian Expresss national editor of strategic affairs Nirupama Subramanian was in Sri Lanka to see how the crisis was unfolding. Nirupama has been reporting on the country since the 90s, and was based out of Sri Lanka from 1996 to 2002. In this episode, she joins us to talk about what has led to this crisis, what she saw on the ground and the challenges that the present government faces. So Nirupama Why dont you begin by telling us just the kind of shortages and problems people in Sri Lanka are facing right now, because of this unprecedented economic crisis.

Nirupama Subramanian:: So the main thing here to remember is that Sri Lanka is a very important based economy, most of its essential items are imported. So this includes fuel oil, well, most of the world imports that, but in Sri Lankas case, its also milk, pulses, lentils, some kind of fish that they dont have then many other things for daily use even detergents. So many of the things that they dont make, its not really a manufacturing economy, their economy is basically tourism and tea, they export tea. And of course, they want tourists to come all the time. So these are the two big things in their economy on which theyre dependent, and the rest is all imported, all the goods are imported. So what happened was that they ran out of dollars to pay for these inputs. That was sometime last year.

Shashank Bhargava: And I think because they ran out of dollars, they couldnt buy fuel. And because of that they have been experiencing crippling power shortages. Right? There have been a lot of power cuts in the country.

Nirupama Subramanian: Yeah, exactly. So because many of the power plants are thermal fired plants, so they need the diesel to actually start them up. So that led to huge power cuts 13 hours at a time now at this point, of course, long queues at petrol pumps for petrol or diesel. And the other thing that happened was that because they had no foreign exchange, the President announced last year that they would stop importing chemical fertilizers and the whole agriculture in the country would switch to organic fertilizers.

Shashank Bhargava: And the way this decision was promoted was that they said that this was going to be some kind of a green revolution.

Nirupama Subramanian: Yeah, he was saying that Sri Lanka will be the first country to go entirely organic. Now farmers started screaming because farmers know better than anyone else that you cant change from one thing to another just overnight. So it was a bit like our Demonetization that overnight this change happened the paddy crop now the yield is much lower than it has been at other times. And because for organic farming, you have to prepare the soil, the soil has to be cleansed over almost a year of the chemicals and only then the organic fertilizers work, all this has happened. So they now have a rice shortage also. So these are the things that are in short supply, there is also hyperinflation so people who have the money can buy some of these items that are available that limited imports that are coming in or earlier stocks they can buy with that money, but even they are feeling the pinch because its not unrestricted supply. You cant go and buy like five or 10 kilos of milk powder because the shopkeeper has to service other customers also so the restrict those supplies and people who cant afford it. Those are the cues you see outside groceries because these are government run grocery fair price shop a bit like our ration shops but its not rational you which is available at a particular time of the month, it is not like that. Its always open grocery. And there because the rice is still sold at the old prices, people queue up for that. So those are the queues outside groceries that you see.

Shashank Bhargava: So, even though things havent gotten to a point where it has led to starvation, we are still seeing long queues for essential items. And one thing we havent even talked about so far is medicines. Those are in pretty short supply as well. Right?

Nirupama Subramanian: Completely medicines are another big emergency actually. Because I can tell you that when I went from here, friends asked me to bring some medicines like paracetamol. The main paracetamol is a brand called Panadol. And that was simply not there in the market. So people asked me to get some kind of paracetamol for them, which I took from here. But other things, I mean, you can put a price, the hotels are open, the restaurants open, the bars are open, people are there in those places eating you can get a pizza with nice cheese and everything on it imported cheese, because they dont really make their own cheese. And then you can order noodles, you can order pasta. So thats a parallel thing. And that happens. I guess even when there is a short supply, there are people who have money, you can go to these places, these restaurants and they can order and they can eat and they can lead their lives as they would normally. But everybody knows that the economy is in freefall, as it were. And these are artificial. I mean, even if they are in a restaurant and eating, its an artificial bubble. I think people are very aware of that because for the first time, even in Colombo, people are feeling the power cuts, the fuel shortages, the diesel shortages. I mean, its not just that you dont have diesel and or you dont have petrol, it is disrupted livelihoods, it has led to an increase in the prices of goods that are available in Sri Lanka, like vegetables. So vegetables are available, but they cost the earth because they have to be transported from A to B, and that requires diesel cabs. Uber is there but cabs are scarce because theres no petrol, theres a huge petrol shortage. So these are the daily things. I mean, so many gigs are dependent upon vehicles now. And those are all out of service because theres restricted supply of these two things.

Shashank Bhargava: Okay. so, when did this economic crisis start? I mean, many believes that this is an old problem, and it has been going on for a number of years. But when did this situation take its current turn? Like one thing you mentioned was Sri Lankas Demonetization moment, the Gotabaya government suddenly deciding to switch to organic fertilizers? So that I imagine was one thing, what are the other reasons?

Nirupama Subramanian: So that was really a consequence of the crisis? What really perhaps triggered it? I mean, if there is one moment to say that if youre looking for that precise trigger, then it was probably immediately after President Gotabaya Rajapaksa election in 2019, during the election, he had promised that he will cut taxes, he will abolish certain other taxes, which he immediately did upon being elected. So that came down from 15% to 8%. He abolished capital gains tax, I think there are seven varieties of taxes that he either got rid of or reduced immediately what happened was that the governments revenues fell dramatically.

Shashank Bhargava: Right, because you do need taxes, the government runs on taxes.

Nirupama Subramanian: Correct. So the minute the revenues came down the international ratings agencies, they downgraded Sri Lanka and Sri Lankas ability to borrow then was affected because earlier it had been borrowing from the market from the international capital market. So its much of its external debt, contrary to widespread belief that it was I mean, the maximum debts are with China, thats not really the case. China is just 10% of its external debt it owes to China and Japan also it was 10% of its external debt is to Japan. But the maximum about 40% is to the international capital markets. So you know, when this revenue fell, and it became very clear to international agencies, whats going on, they downgraded and Sri Lankas ability to borrow from the international market also ended so it started digging into its own reserves. And now when youre clearly living beyond your means, and then the pandemic hit in March, and the tourists stopped coming, and when the tourists stopped coming, then of course, it was completely I became unsustainable,

Shashank Bhargava: Right, because you mentioned that the two big things that Sri Lanka earns money from is tourism and tea.

Nirupama Subramanian: Tourism, tea and remittances also of workers living abroad. I mean, if youre thinking in terms of foreign exchange, these are the three big foreign exchange earners and then during the COVID all those people also came back because jobs were cut and majority of them like in everywhere in South Asia are low income earners, they go to work in low end jobs. A house helps, carpenters, masons that kind of job. So those God cut and they all came back. So that remittance also dramatically reduced. So this was the origin of the crisis.

Shashank Bhargava: And when talking about tourism, how much did the Easter bombings, the series of bomb blasts that took place in Colombo in 2019? How much has that contributed to the current problem? Because we know that the bombings had affected tourism as well.

Nirupama Subramanian: Yeah, actually, now that you say that we are talking exactly on the third anniversary of that Easter bombings. And in 2019 itself, as soon as the Easter bombings happened, the tourism business nosedived. And so it is already a struggling thing, right. And then in 20, the pandemic really finished whatever was left of it. So just before the second wave, they had a good season, I think. And then there was a second wave. And then after that, again, it picked up. So what Im hearing is that they are already on the path to recovery on the tourism sector. And when all this suddenly hit the roof, the shortages and everything.

Shashank Bhargava: Okay, so one thing is COVID, which every country in the world had to deal with. But a lot of the crisis that were seeing right now appears to be because of the mismanagement and the policies of the government. And this seems to be genuine anger in people against the Gotabaya Government. How do we see that anger manifested on the ground?

Nirupama Subramanian: So that anger is very clear on the streets, people have come out, Ive never seen something like this. In all the years that Ive been following Sri Lanka used to be based there during the years that the government was waging this. I mean, the government and the LTTwere locked in a huge war. Ive never seen this kind of protest, even then the economy used to struggle at times, but this kind of a shortage, they have probably the nearest they have come to experience. This was in the 70s. But those were the shortages. People remember the as being comparable, but even those were not as crippling as ones that theyre facing now. And therefore the anger or the anger started with the farmers saying our crops are going to be destroyed by this whole organic fertilizer experiment. But you know, farmers voices, as we know, unless they take to the streets as they did in India, they dont come out really but what has happened in the last three months is that the Colombo folk have started feeling the pinch badly.

Shashank Bhargava: From the rural areas. The anger has now spread to the urban parts.

Nirupama Subramanian: Actually, the main the biggest protest we are seeing right now is in Colombo, there are so many protests outside, theres great discontent. Theres much insecurity about the future across the country, but the protests are really in Colombo, and for the first time middle class Colombo, wealthy Colombo professionals in Colombo lawyers, teachers, doctors, these are people who would not normally see on the road protesting like this, but theyre all out there. And the target of the ire of naturally is the President Gotabaya Rajapaksa and of course, theres a feeling that the entire family the Prime Minister is Gotabayas elder brother Mahinda Rajapaksa who used to be president before. He was president for 10 years between 2005 and 2015. And now he is the prime minister. And then there are many other family members in the government. So theres a feeling that we are suffering and they are very clear in their minds that these people have made money out of mismanaging the economy. They are well off, they are wealthy, they have the flash lifestyle. In fact, Namal Rajapaksa, whos the Prime Ministers son went off in the middle of these protests to the Maldives and the hotel put it up to advertise their own property saying Namal Rajapaksa. You know, he was waterskiing and they had a photo and all that that really got people.

Shashank Bhargava: Wait, so while Sri Lanka is facing a crippling economic crisis, you have the Prime Ministers son who is waterskiing in Maldives?

Nirupama Subramanian: Yeah, exactly. So all this really boiled peoples blood over and theyre out on the street, and everybodys saying they have to go first, well be able to solve our problems. Only this family quits all its positions in government, all the positions that are with the family members in the government, they have to leave and only then we can start solving the other problem.

Shashank Bhargava: And I suppose this is a bit surprising, right? Because up until a few months ago, the Rajapaksa family was actually pretty popular with the people right like people were pretty happy with them.

Nirupama Subramanian: Yeah, people are happy with them because people are especially happy with both minder Rajapaksa and his brother Gatabaya Rajapaksa because in 2009, when Mahinda was the president Gotabaya was a defense secretary, and he is widely credited as the architect of the defeat, or lets say, as the architect of the military campaign against the Tamil Tigers, which was successful and the entity was defeated. And both brothers took credit for having defeated terrorism and securing the country as it were from this terrorist group that was operating in the north and killing people in the south with it suicide bombers and all that this generation of protesters thats out there knows nothing. It has come of age at a time when Sri Lanka has known complete peace. There isnt that kind of fear that used to prevail at an earlier time.

Shashank Bhargava: So this idea that they got rid of terrorism from the country is what ran in their favor, basically.

Nirupama Subramanian: Yeah, so they have actually dined out on this they have projected themselves as the saviors of the country and then very quickly, it turned into the saviors of the Sinhalese Buddhist majority. So immediately after the war, and which ended in 2009, you saw this resurgence of Sinhalese or this majoritarianism this triumphalism in the majority community, the saying that, you know, we have defeated not just the LTT but also the Tamil community, you know that now we have kind of shown them their place. So this was the widespread kind of feeling at that time, and they have made good of this to win elections and so on.

Shashank Bhargava: And now the Sinhalese Buddhists, the majority population in the country are now also part of the protests against this government. But with this kind of anger with people protesting what kind of challenge does the Gotabaya Rajapaksa government face politically?

Nirupama Subramanian: So politically, still, there is a degree of uncertainty immediately after the first big incidents of these protests were on March 31. Okay, that is when some people attacked, tried to break into go to bars, restaurants, private residence, not as official residence. Its in a suburb of Colombo. And he never felt unsafe or insecure there before because he was so well loved by the people. Also, he believed that youd never be harm like that. So he was to live there often. And I dont know whether he was there on that particular day or not. But on March 31, like about hundreds of people, maybe 1000 people or so were in that March. And then they tried to break through the barricades and police had to resort to tear gassing and water cannons and some buses and all other vehicles belonging to the police was set on fire. So this was a big reality check for the entire house of rajapaksas. Because it was scary, I guess. And then he, of course, immediately call an emergency and put a curfew and all that, but better sense prevailed. And he pulled back all that because people were defying, because in a previous time curfew meant a curfew, nobody would step out. Because I mean, you could be shot off the streets immediately. But this time, people said to have a curfew. And they took out marches during the curfew. And I wasnt there on that particular day. But somebody who witnessed itself it was for me unprecedented that somebody will break a curfew. Like hes an older person. He is I think in a 60s and he has seen the worst of times earlier as well. Listen, unbelievable that people are marching on the streets completely defying saying come and arrest me if you want but I am going to march on the streets.

Shashank Bhargava: Okay, so this is what has happened on the streets with people. What has happened in the parliament so far.

Nirupama Subramanian: So what happened was basically there was a moment when, of course, in parliament they enjoy or they had a two thirds majority, because mind that just swept the elections. But what happened after these protests was a group of Parliamentarians 42 of them, they withdrew from the coalition, and they said theyre going to sit separately in Parliament, then there are some others within that ruling Alliance who are also unhappy with the rajapaksas. And they also indicated that they may not be with it, but even the withdrawal of these 42 people rendered their majority in parliament a bit shaky. Now, the claims on either side that we still have the majority and opposition saying no, you dont have the majority. The fact is, what has happened is no one has gone out and tested this, the opposition has not yet challenged the government to a floor test, whether through a no confidence, motion, or whatever. Instead, what has happened is the government has seen that the diffidence in the opposition ranks because no one has actually emerged as a challenger to Prime Minister Mahinda Rajapaksa in Parliament. So there is a feeling that we can still possibly manage the situation among the Rajapaksa as this is appealing.

Shashank Bhargava: Right and when Rajapaksa as majority became unsure, they even asked all ministers to hand in their resignations. And they said that they will appoint a new government, and they even invited the opposition to form a new government. But the opposition of course said that they dont want to be a part of this. In fact, you I had one of the main opposition leaders this man called Sajith Premadasa. He said that they should instead abolish the executive presidency. Sri Lanka of course has a kind of presidential system in which the Executive power is exercised by the President on the advice of the prime minister. And Premadasa says that they should get rid of that. Why does he want that?

Nirupama Subramanian: So the executive presidency in Sri Lanka is very, very strong. You know, the guy who the president who got it in who made this oversaw the transition from Prime Ministerial former government to the presidential former government was J.R Jayewardane, and he famously joked, I dont know it may be an apocryphal story, but it said that he used to boast that with this constitution, a president can do anything except change a man and to one and a woman into a man, everything else is possible for a president for this constitution. So now it gives so much powers. Thats also another reason why no one wants to form an interim government with Gotabaya still as executive president,

Shashank Bhargava: Right, because no matter what they do Gotabaya in his position as the president can just change that.

Nirupama Subramanian: Yeah, he can still change that if Prime Ministers Mahinda Rajapaksa and the brother is the President, if the finance minister of say from the opposition takes a particular decision, Prime Minister and President can join hands and they can sack the finance minister also. So that is another reason why national government is not such a hot attraction for anybody but Sajith. Premadasa believes that if you abolish the executive presidency, half the problems in this country will resolve themselves on their own, and perhaps they will, and he has made a big pitch for it. But the problem is that its a very long game.

Shashank Bhargava: Yeah, it would require significant amendments in the Constitution, right?

Nirupama Subramanian: Yeah, there has to be amendments to the Constitution, it needs a two thirds in Parliament. Now, even for the no confidence motion, which they have been discussing, which is a simple majority. Theyre wondering if they have a simple majority or not. But two thirds in Parliament, even if its passed by Parliament, it has to be approved in a referendum. So those are very, very long process. And many people have tried it before. I mean, many people have at least promised it before but have never kept their promise. Because once they become president, then they see Oh, wow.

Shashank Bhargava: Yeah, because then they also enjoy the same powers and privilege.

Nirupama Subramanian: Yeah, they dont want to change it. So there is an impasse, meaning the rajapaksas have not yet been able to appoint a full cabinet. Theyve been asking people to come up and take charge. But I think every minister, every person who was in the cabinet before, and everybody whos being approached by the rajapaksas are feeling the heat of the protests outside and they dont want to be compromised or tainted by accepting a position now so that everybody is waiting and watching.

Shashank Bhargava: Okay, so you have the Rajapaksa who have immense power because of the presidential system. And even though they have a wafer thin majority, they dont have a major challenger who can strongly oppose them. And then you have a large population of the country who want them to go, but obviously theyre not doing that. And you spoke to protesters, and Im sure because of all these factors, they must be so uncertain about the future, right?

Nirupama Subramanian: Yeah, So nobody knows what next and even in the opposition, no one knows what next. So even for the opposition, whatever glue it is, that can bring them together is if tomorrow we bring a no confidence motion against Prime Minister Rajapaksa. What is the next step? What after that, who will form the government? What kind of government will it be who will edit? Those are the questions that they have not been able to resolve? Monday, April 19, is when the parliament meets again, so maybe something will emerge from that session?

Shashank Bhargava: Okay, so now lets come to the India part of the story. India has extended help Sri Lanka, it has given the country rice and fuel, both diesel and petrol. How much relief has that been to the country?

Nirupama Subramanian: So it has eased the shortages, but its limited quantities right? I mean, its 500 million credit line for fuel. So, you have seen diesel coming in from India and it has eased the shortages a bit and then there is another credit line of $1 billion for food and medicines. So Indian rice has been has started coming in. And April 14, it was a new year for Sinhalese and for Tamil so they were able to release some supplies of rice into the market. So the shortages were kind of mitigated a bit. So this is the extent and India is supposed to be considering another 2 billion in some form or the other it may not be a credit line. It may be something in some other form, but they are supposed to be considering this request from Sri Lanka for another 2 billion

Shashank Bhargava: and Nirupama. One of the things that you write is that Sri Lankans, they sort of have a mixed reaction to this assistance by India, right.

Nirupama Subramanian: Yeah, so one of the very first things that I heard when I left landed in Sri Lanka and went to a protest site was somebody just asked me Are you Indian? So I said yes. He said, I have a message for India tell your government not to help the Rajapaksa they must stand with the people. They must not stand with Rajapaksa. So I asked him, Why do you say that he was not able to explain it to me immediately. But I spoke to some other people later on. And they said, there is a sentiment, theres an undercurrent in which this food help and the diesel help that and the fuel help that weve been extending people think, okay, the shortages will be mitigated by that and then peoples anger will come down, the temperature on the streets will come down, and the rajapaksas will use it to their advantage, they will take the credit of that. So this I heard even as late as two days ago, when somebody said, your government is giving 2 billion more to the rajapaksas. So I said, its not for the Rajapaksa, its for the people of the country. They said yeah yeah. I mean, thanks a lot, but what is going to happen is that they are going to take the credit of that, you know, so there is a very strong undercurrent in this whole thing that India is probably trying to save the situation for the rajapaksas. So the Indian High Commission, whenever it speaks on these issues, they emphasize very strongly that it is a humanitarian assistance that they are extending ages for the people of the country, it is to mitigate the suffering of the people. The other rumor that came up and that also was denied very emphatically. I mean, they had to actually deny more than once the Indian High Commission is that the Indian Army had landed in Sri Lanka. And they were going to help secure the Rajapaksa family. And again, this had to be refuted very strongly by the Indian High Commission, because I dont think theres any such thing and India would not be so adventurous as to send some soldiers to another country. Theyve done this in the past, and they did this in the Maldives wants to secure your home against a coup attempt. But that was different. I mean, those are different circumstances.

Shashank Bhargava: Okay, so finally, is there any next big thing or an event that will decide how this crisis will unfold?

Nirupama Subramanian: So now theres fear that they might actually crack down on the protesters, maybe try to drive them away, maybe call them for talks, I think Mahinda Rajapaksa said, come and talk to me. And they said, No, first you go, and then we will talk to you. So theres been theres all that also, I think things are a bit up in the air right now. Well have to see. I think the next big thing really, in this week will be what happens at the IMF. And of course, Sri Lanka is reaching out to various countries for bridge financing the reckon for the next six to nine months, theyll need about three to $4 billion to meet the import bills. So they will be looking for that the government is hoping to tire out the protesters that they will go home, how long can they stand here and shout, maybe the energy will dissipate and they will go home. So that is one line of thinking that do not think let them all just let it fizzle out. And they also declared all of last week a holiday. They said its New Year. And so between two weekends, all days were declared official holidays by the government thinking that people will stay at home. But actually it worked in the opposite way. A lot of people just congregated at golf ease, which is the site of the protests. And I mean, the numbers are now huge. So its growing in many ways. And we just have to see how this is resolved. But a lot of people thought regime change is imminent. That has not happened yet. And for the protesters, that is a big disappointment that you know, they didnt run away.

Shashank Bhargava: Youre listening to three things by the Indian Express. Todays show was written and produced by me, Shashank Bhargava and was edited and mixed by Suresh Pawar. If you like the show, then do subscribe to us wherever you get your podcast. You can also recommend the show to someone you think would like it, share it with a friend or someone in your family. Its the best way for people to get to know about us. You can tweet us at @Expresspodcasts and write to us at podcasts@ Indianexpress.com

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How Sri Lanka's unprecedented crisis is unfolding on the ground - The Indian Express