Sri Lanka Reinstates Emergency As Economic Crisis Drags On
- May 7, 2022
- Arjun Pandit
Months of economic crisis have brought thousands of people on streets demanding the resignation of the current president and government. Economic crisis is expected to stretch into 2023 with the slow recovery in tourism and tea and apparel exports.
Sri Lanka imposed an emergency for the second time in five weeks as protests continued in the capital city of Colombo.
President Gotabaya Rajapaksa's order gives broad powers to security forces in clamping down violent protests.
"in the interests of public security, the protection of public order and the maintenance of supplies and services essential to the life of the community," the statement released by the President's office noted.
The island nation of 22 million (2.2 crore) citizens has been struggling with shortages of food, energy, and fuel.
The nation also defaulted on its $51 billion foreign currency loan last month and is currently in negotiation with the International Monetary Fund and India.
Students have been protesting for months and demanding the resignation of the current government.
Sri Lanka's economic crisis worsened after the pandemic stopped the steady flow of tourist arrivals and supply disruptions affected the export of main crop tea and apparel.
The island nation heavily relies on tourism which generated $4 billion in 2019 with additional merchandise export of $13 billion, according to the data released by the government.
Record 2.8 million tourist arrived in 2018 but the arrivals plunged to 1.9 million following the Easter Sunday bombings in 2019, according to the statistics provided by the Sri Lanka Tourism Development Authority.
Tourism arrivals dropped further to 194,500 in 2021 from 507,311 arrivals in 2020 when most arrived before the onset of the coronavirus pandemic forced the airport closures in March.
With a total of 285,000 arrivals, tourism has been on the rebound in the first quarter of 2022 but still 60% below the record arrivals in the period in 2018.
With the foreign exchange reserve exhausted and the tourism industry showing no sign of rebound, the government was forced to seek loans from India and the international multilateral institutions.
For months, Sri Lankans have been struggling to access daily necessities and basic food items as the country is experiencing power cuts and fuel rationing and unable to pay for oil and food imports.
Tourist arrivals from China are not expected to rebound as the communist nation is battling the resurgent coronavirus and European tourists delay their travels.
Frequent power cuts and lack of fuel has hampered the apparel exporters in meeting their orders.
Moreover, high fertilizer prices and lack of foreign exchange has also curtailed tea production 30%.
At the close of financial markets on Friday, the Sri Lankan rupee traded at 360 in Colombo against one U.S. dollar, down sharply from the low of 175 in the last week in April 2019 just before the Easter bombings.