COLOMBO, Sri Lanka — The South Asian nation of Sri Lanka is experiencing an unprecedented economic collapse that has pushed the government into a deep crisis. The island is struggling to import basic necessities for its 22 million people because of diminishing foreign reserves and crippling debt, spurring weeks of anti-government protests that recently turned violent and led to the prime minister’s resignation.
Much of the public ire has been directed at President Gotabaya Rajapaksa and his brother, former Prime Minister Mahinda Rajapaksa, who are blamed by critics for leading the country into the economic crisis.
WHAT LED TO THE PROTESTS?
The pandemic and the Russia-Ukraine conflict have made things worse, but warnings of a potential economic disaster began long before.
In 2019, President Rajapaksa swept to power months after Easter suicide bombings at churches and hotels killed 290 people. The attacks badly damaged tourism, a key source of foreign exchange, and Rajapaksa promised to pull Sri Lanka out of a deep economic slump and keep it safe.
The government needed to boost its revenues, especially as foreign debt ballooned for big infrastructure projects, some financed by Chinese loans But just days into his presidency, Rajapaksa pushed through the largest tax cuts in Sri Lankan history.
The move sparked quick punishment from the global market. Creditors downgraded Sri Lanka’s ratings, blocking it from borrowing more money as its foreign reserves nosedived. Soon after, the pandemic hit, flattening tourism again as debts mounted.