Mismanagement of economy led to crisis
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COLOMBO • Sri Lanka's economic crisis looks to have finally toppled President Gotabaya Rajapaksa.
Mr Rajapaksa, a retired military officer, fled the country early yesterday and arrived in Male, in the Maldives, hours before he was to have left office.
Later in the day, Sri Lanka's Prime Minister Ranil Wickremesinghe was named acting president. But that did not placate the thousands of protesters who stormed Mr Wickremesinghe's office, breaching police and military defences, to raise their flags there, as a people's uprising over a devastating economic crisis continued to rage.
HOW DID IT COME TO THIS?
Economic mismanagement by successive governments has weakened Sri Lanka's public finances, leaving national expenditure in excess of income, and the production of tradable goods and services at inadequate levels.
The situation was exacerbated by deep tax cuts enacted by the Rajapaksa government soon after it took office in 2019.
Months later, the Covid-19 pandemic struck.
That wiped out much of Sri Lanka's revenue base, most notably from the lucrative tourism industry, while remittances from Sri Lankans working abroad dropped and were further sapped by an inflexible foreign exchange rate.
Rating agencies, concerned about government finances and its inability to repay large foreign debt, downgraded Sri Lanka's credit ratings from 2020 onwards, eventually locking the country out of international financial markets.
To keep the economy afloat, the government leaned heavily on its foreign exchange reserves, eroding them by more than 70 per cent in two years.
HOW HAS THIS BEEN FELT ON THE GROUND?
The crisis has crippled Sri Lanka, once seen as a model for a developing economy.
Sri Lankans have endured months of medicine and food shortages and electricity blackouts, while fuel stations have run out of petrol and diesel despite pleas to Russia and others for discounted oil.
Unofficial inflation rates are second only to those of Zimbabwe, making many goods - if they can be found - too expensive for many people to afford.
WHAT HAS THE GOVERNMENT DONE?
Despite the rapidly deteriorating economic environment, the Rajapaksa government initially held off talks with the International Monetary Fund (IMF).
For months, opposition leaders and some financial experts urged the government to act, but it held its ground, hoping that tourism would bounce back and remittances would recover.
Eventually, aware of the scale of the brewing crisis, the government did seek help, notably from India and China, regional superpowers that have traditionally jostled for influence over the strategically located island.
India has extended billions of dollars in loans to help pay for vital supplies. In all, it has provided support worth more than US$3.5 billion (S$4.9 billion).
China has intervened less publicly, but it has said that it supports efforts for Sri Lanka to restructure its debt.
Sri Lanka eventually opened talks with the IMF.
SO, WHAT HAPPENS NOW?
A sitting president being ousted by street protests is unprecedented in Sri Lanka's post-independence history.
Sri Lanka's Constitution dictates that should a president resign, the country's prime minister will assume the role.
But Mr Wickremesinghe has said that he, too, will stand down.
It is therefore likely that the Parliament Speaker, Mr Mahinda Yapa Abeywardena, will assume temporary charge of the country until lawmakers elect a new president to complete the rest of Mr Rajapaksa's term, due to end in 2024, said constitutional expert Jayadeva Uyangoda.
WHO ARE THE RAJAPAKSAS?
President Gotabaya Rajapaksa, 73, head of state since 2019, is just one member of a clan that has dominated politics in the South Asian nation of 22 million people for years.
His brother Mahinda Rajapaksa, 76, was president for a decade until 2015, and oversaw the bloody end to Sri Lanka's long-running civil war in 2009 when Mr Gotabaya Rajapaksa - dubbed "The Terminator" - ran the security services.
Under Mr Mahinda Rajapaksa, Sri Lanka moved closer to China and borrowed billions of dollars for vanity projects like cricket stadiums and airports, as well as a deep-sea port since leased to Beijing.
REUTERS, AGENCE FRANCE-PRESSE
