Political unity vital to solve Sri Lanka's economic crisis

There are no quick fixes to Sri Lanka’s mounting financial crisis that was in the making for over two years, Prime Minister Mahinda Rajapaksa’s resignation on Monday following weeks of mass street protests, curfews, and clashes may calm political tensions for a while in some quarters but economic conditions remain dire in the country of 22 million people. The poor have been without water, electricity, and fuel for weeks, and there appears no easy way out of the mess the country finds itself in.

The middle class is feeling the pinch too as fuel prices soar and lines outside petrol stations get longer. This is the worst crisis the country has seen since independence in 1948, and the worst may be coming before Colombo lays out a clear path for fiscal discipline and, more importantly, political reforms, that could begin with a new-look government run by technocrats and experts.

Who will replace PM Mahinda Rajapaksa is the big question?

Sacrifices have to be made for the sake of the economy and the people want results from the government. Blame has been laid at the doorstep of the ruling Rajapaksa family who may be losing their grip on power following their mismanagement of the economy. But part of the problem may be plain bad luck, and pandemic woes that have hit the tourism sector, one of the key drivers of the economy.

Tourist arrivals had been in decline after the Easter bombings on churches by terrorists in 2019. Natural disasters like floods caused by heavy monsoons were also a factor. A government ban on fertilizers harmed farmers and hurt harvests.

Over the last 10 years, the government had borrowed heavily and now finds itself in a perfect economic storm with a massive deficit.President Gotabaya Rajapaksa, in a bid to kickstart the economy, slashed taxes but the move was met with failure.

Ratings fell and so did borrowings that forced the government to dig into its reserves of $2.2 billion this year. The president has urged all parties in the country to stay united but the opposition thinks the government must go as the country considers help from the IMF and more aid from neighbours like India which has already extended a credit line of $1 billion.

Meanwhile, affected Sri Lankans are leaving the country in search of opportunities. The expat community has chipped in which isn’t enough to revive the economy. The government has offered golden visas to investors who remain wary of the country’s prospects.

Consumer price inflation, which was 6.2 per cent last September, has jumped to 17.5 per cent this year. The country has to repay $4 billion by the end of 2022. Uncertainty and unrest pervade the island nation that has battled militancy over decades. A united government is vital in these times. The opposition and the government must close ranks in the interests of the nation. Only political unity will lead to economic stability.