Explanation: What caused Sri Lanka’s economic collapse?


Colombo, Sri Lanka — Sri Lanka, a South Asian country, is experiencing an unprecedented economic collapse that puts its government in a deep crisis. The island is struggling to get the basic necessities of its 22 million people due to declining foreign exchange reserves and severe debt, and has turned violent in recent weeks, sparking anti-government protests that led to the resignation of the prime minister.

Much of the public outrage is directed at President Gotabaya Rajapaksa and his brother, former Prime Minister Marina Rajapaksa.

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What are the causes of protests?

The pandemic and the Russia-Ukraine conflict made the situation worse, but warnings of a potential economic catastrophe began long before that.

In 2019, President Rajapaksa took office months after suicide bombings at Easter churches and hotels killed 290 people. The attack caused serious damage to tourism, a major source of foreign currency income, and Rajapaksa has promised to keep Sri Lanka safe from a deep recession.

The government had to increase revenues. While foreign debt has soared, especially for large infrastructure projects, some funded by Chinese loans, Rajapaksa pushed ahead with the largest tax cut in Sri Lanka’s history within days of taking office.

The move sparked quick punishment in the global market. Creditors downgraded Sri Lanka’s credit rating so it couldn’t borrow more money as its foreign exchange reserves plummeted. Shortly thereafter, a pandemic struck and debt increased and tourism contracted again.

The country’s foreign exchange reserves fell below $50 million. This has forced the government to stop paying off the $7 billion in foreign debt that matured this year, out of a total of $51 billion to pay off nearly $25 billion by 2026.

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Who are the Rajapaksa brothers?

National protests are calling for the removal of the Rajapaksa brothers, a dramatic reversal of Sri Lanka’s most powerful political dynasty.

Mahinda and Gotabaya Rajapaska were hailed as heroes by many of the island’s Buddhist-Sinhala tribes, who in 2009 ended a 30-year civil war against Tamil rebels. Despite accusations of war atrocities, they gained great popularity. After the war, a military strategist who helped put down the rebels with a brutal operation, Gotabaya.

A powerful land-owning family in the rural south, the Rajapaksas dominated local elections for several years before entering national politics in 2005 when Mahinda was elected president. He remained in power until 2015, but was defeated by an opposition party led by his former aide.

After the 2019 Easter bombings, the family regained power under Gotabaya, who ran for president in a high-pitched nationalist campaign that secured voters disillusioned by the previous government for the attack.

Critics have accused Rajapaksas of relying heavily on the military to enforce policies, passing laws that weaken independent institutions, and maintaining an almost monopoly in decision-making. Three other Rajapaksa members remained in the cabinet until early April, when the entire cabinet resigned due to protests.

Marinda’s resignation on Monday is a partial victory for the protesters. In particular, as protests continue outside the Oval Office, pressure on the president to resign is growing again.

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What’s next?

President Rajapaksa has no prime minister and no cabinet and is automatically dismissed after his brother resigns.

He can now elect a member of parliament who will become the next prime minister and form a cabinet. His choice requires the support of a majority of 225 MPs. It’s unclear whether he still has enough support in Congress to get his candidacy approved.

The president can try to form a unified government, but it will be difficult to convince the opposition to participate.

If the president resigns in the absence of a prime minister, the Speaker of the National Assembly becomes the interim president for one month, during which time Congress elects a member of the parliament to become president until elections are held.

Rajapaksa’s impeachment plan would not have been easy. Requires approval from the President of Parliament, the Supreme Court and the support of at least 150 members. The process is getting more complicated as the opposition party doesn’t get a majority in parliament.

Sri Lanka has had one attempt to oust a president in 45 years of its rule by a presidential system. The Constitution gives the president broad powers to appoint the commander-in-chief of the armed forces, the head of the cabinet, the chief of the Supreme Court, and the chief of the police.

The president, despite his broad powers, still needs a prime minister and a cabinet to perform executive functions. Continuing uncertainty over the president’s next move and administrative vacuum have heightened fears of a military takeover, especially when violence escalates.

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Pati reported from New Delhi.

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