Sri Lanka reeling under debt : Western imperialists desperate to dominate by intensifying the crisis!

In neighboring Sri Lanka, prices of essential food items like rice, wheat, pulses, sugar and onions have skyrocketed. The Government of Sri Lanka has declared an economic emergency. People had to queue up at vegetable – grocery stores and the army is deployed to regulate the supply of essential commodities. Sinhalese, Tamils, Muslims and Christians – all working class people are deprived of food due to record prices and are half starved.

Sri Lanka is galloping towards a major economic crisis, with falling exports, Forex deficits, currency depreciation and the escalation of credit crunch. The bourgeois press attributes the current economic crisis in Sri Lanka to the recession caused by the Corona pandemic. But behind this crisis lurks the US-led imperialism.

The Sri Lankan economy is dependent on the export of ready-made garments, the export of tea and the revenue generated by tourism. Ready-made garments account for 52 per cent of the total exports and tea 17 per cent. Due to the global economic slowdown following the Corona pandemic, Sri Lanka’s exports have declined drastically and the economy has been hit. Sri Lanka’s GDP growth fell further in 2020 from 1.1 per cent in the second quarter of 2019 to a record low of -16.3 per cent (minus 16.3 per cent). Forex reserves have dried up as the tourism sector has been hit hard and there is decline in exports. Multinational corporations are withdrawing their Institutional Investments (FII) and exiting the country.

Today, Sri Lanka is a country that imports large quantities of essential commodities, including food. As a result of Forex deficit, the government stopped importing turmeric early this year. Imports have also been banned since June. Imports of essential commodities including palm oil have also been drastically reduced. Moreover, the manufacturing sector is paralyzed due to insufficient funds to import spare parts for automotive parts and raw materials for ready-made garments. On the other hand, Sri Lanka’s currency is also depreciating. As a result of this, there is a rise in inflation and prices of essential commodities have skyrocketed to unprecedented levels.

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As on September 19, the price of red lentil dal per kg is Rs.250 per kg, sugar is Rs.215 per kg, potato is Rs.300 per kg and bellary onion is Rs.400 per kg. The highest price of black gram is Rs.2,000 per kg and turmeric is sold between Rs.4,000 and Rs.5,000. But there are unofficial reports that the ground situation is even worse due to various reasons including hoarding of food items.

The government advices, “The government cannot arrange food for all; Therefore, people should switch to home gardening” . It also advices the people to give up buying goods from outside as much as possible and meet their food needs on their own.

Another major crisis in Sri Lanka is debt. This is a long-standing problem. Since 2014, Sri Lanka’s foreign debt has begun to rise sharply. Debt, which stood at 42.9% of GDP in 2019, touched 101% in July this year.

In July 2021, Sri Lanka’s foreign exchange reserves stood at USD 2.7 billion, while Sri Lanka’s foreign debt stood at over USD 35 billion. The extent of this debt crisis is such that about 80 percent of the Sri Lankan government’s revenue is spent on paying interest on the loans. On the other hand, Sri Lanka has been forced to borrow more to meet the Forex deficit.

The Gotabaya government has been borrowing largely from China. Following a USD 1.5 billion loan from China last March, it further received a loan of 61.5 billion Sri Lankan Rupee on August 17. Opposition parties and economists have slammed the Gotabaya government, saying that the move of borrowing from China, would bring Sri Lanka under Chinese control. They warn that China’s loans are “short-term loans” and if it is not repaid within that time frame, Sri Lanka will have to succumb to China’s compulsion.

In return for a loan from China for the development of the Hambantota port, the Sri Lankan government has already leased the Hambantota port to China for 99 years. In addition, China dominates Sri Lanka through a number of other projects also, including the Hambantota Airport, the Southern Expressway, coal based power station, and the port city of Colombo.

Former Prime Minister and current parliamentarian Ranil Wickremesinghe suggests the ruling party to approach the IMF to address the economic crisis.

“If we turn to the IMF, we can solve the economic crisis, but many social problems will arise. The terms of the IMF are now politically orientated. Therefore, the government does not need to go to the IMF”, Finance Minister Cabreal replied. We can understand that the minister’s statement that “the terms of the IMF are now politically orientated” refers to the political hegemony of the United States.

Thus, the two ruling class parties are proposing two different solutions to the current forex crisis in Sri Lanka. ‘To whom should Sri Lanka be mortgaged?’ is the essence of their stupid conflict; ‘To China or to the United States?’ They are not patriots who are fighting for the sovereignty of their country.

The Sri Lanka Podujana Peramuna (SLPP) party, led by Sri Lankan President Gotabaya Rajapaksa gang, is a Chinese loyalist faction. Since assuming power, the party and the regime have been taking various measures to keep Sri Lanka vulnerable to China’s hegemonic appetite. The Hambantota port lease issue alone is enough to testify to this.

The government of Maithripala Sirisena and Ranil Wickremesinghe, loyalists of US-led imperialism and Indian supremacy, planned to jointly develop the East Container Terminal (ECT) at the Colombo Port based on 2019 tripartite agreement with India and Japan. But within three months after assuming power, the Gotabaya government cancelled the project. In July 2020, the Gotabaya government repaid USD 400 million loan that they received from the Indian government to deal with the Corona pandemic.

These are just few examples. The pro-Chinese actions of the Gotabaya government and not co-operating with the strategic plans of the US has annoyed the US-led imperialist powers. With an intention to intimidate the Gotabaya government, the European Union (EU) has announced that it will end the tax concessions given to Sri Lanka in the name of GSP (Generalized System of Preference).

The EU provides 66 percent tax concession on goods exported from Sri Lanka with 27 conditions (on the basis of protecting human rights, labour livelihood, environmental protection, and better management) to help boosting Sri Lanka’s economic growth. This benefit is to be cancelled from now on. The EU is justifying its insolence by stating that human rights are being suppressed in Sri Lanka, citing the Sri Lankan government’s repressive law, Prevention of Terrorism Act (PTA). History is that if the imperialists are ‘concerned’ about the suppression of human rights in other countries, then it is a tactic to destabilize that country.

The main reason for Sri Lanka’s current crisis and Forex deficit is the Sri Lankan government’s strict implementation of the liberalization-privatization-globalization policies and the restructuring of Sri Lanka’s economy for the domination and plundering by the US-led imperialism.

The basis of these undying crises is the transformation of Sri Lanka’s economy into an export-based productive back-up to the world market rather than a domestic self-reliant economy. The economic stagnation caused by the Corona pandemic has further shrunk Sri Lanka’s global market and pushed it into a permanent crisis. In order to prevent Sri Lanka from leaning towards China, western imperialists are taking advantage of this situation and pressuring the Sri Lankan government by intensifying the economic crisis and starving millions of working people.

The only way to resolve these crises is to mobilize the working class people of Sri Lanka under the leadership of the revolutionary-democratic forces to liberate Sri Lanka from the iron grip of US-led imperialism and China, and fight for a self-governing, sovereign State. As Sri Lanka’s political and economic emancipation is intertwined with the emancipation of the working people in other South Asian countries, including India, it is our duty to speak out in support of the struggles of the Sri Lankan working people. It is the united struggles of the working people in these countries that will send imperialism to the graveyard in the South Asian region!

David