Reportage
Sri Lanka, a pearl in a trap, forced to accept IMF assistance
After the disastrous management of the country ended with the flight of the Rajapaksa, almost 7 million people are starving. Prices are booming. Women are turning to prostitution. Sri Lanka handed itself over to the International Monetary Fund.
It’s hard to forget the image of a line of toothless women of uncertain age, wrapped in filthy, frayed old saris, returning from the tea harvest in the green hills of Kandy, in the heart of Sri Lanka. Pariahs in their tradition, even before the merciless rules of the market and wages, they have always been a mirror of a country of sharp inequalities.
Her Majesty’s Empire, convinced that Hindu immigrants would work better than the natives, forcibly relocated entire families here to make flourish the trade of the Camellia Sinensis plant, which Scotsman James Taylor had begun cultivating on a 7.5-hectare estate in 1867. This portended the future of the Pearl of the Indian Ocean – Sri Lanka – as a country exporting nearly a quarter of the planet’s tea in 2021, second only to China and ahead of Kenya and India.
Today, it’s difficult to say what will become of this Hindu enclave, with people imported by the British Empire between the 19th and 20th centuries from the Tamil regions of India to work on coffee, rubber and, of course, tea plantations. Pariahs both in India and in Sri Lanka for as long as they can remember, today they are probably one of the Sri Lankan communities paying the highest price for a financial and political crisis that led Colombo to declare bankruptcy in the spring.
It is unlikely that the loan agreed on Thursday between the Monetary Fund and the Sri Lankan government will do much for the country. The government was born out of the departure of the ruling family – the Rajapaksas – in the wake of protests that have yet to die down since the country plunged into the perverse cycle of foreign debt that has slowly strangled it. The loan is worth over $50 billion, on which Colombo is not even able to pay interest, and which will see an injection of nearly $3 billion from the IMF over the next four years to deal with the crisis. It comes at a cost of great suffering and pain, the consequences of the clause committing Colombo to repay the money and follow the dictates of the Fund.
After the tea workers, those in the textile industry are certainly not faring any better, and the crisis has forced them to choose between unemployment and prostitution. According to Stand Up Movement Lanka (SUML), which promotes the rights of workers and laborers, migrants and prostitutes, the crisis has seen makeshift brothels springing up all over the country, with prostitution increasing by 30% in recent months. The activists are saying women here are forced to become prostitutes in order to survive, in places posing as health clubs. Testimonies collected by the movement say this is the only way they can provide three meals a day for their families. A forced choice, due to job disappearances or wage cuts in the textile industry, also confirmed by an investigation by the local newspaper The Morning.
Furthermore, there are fewer and fewer job opportunities, especially for women: agriculture, a key sector of the economy, has seen harvests drop by as much as 50% after then-President Gotabaya Rajapaksa banned the import of chemical fertilizers in May 2021 (certainly not for ecological reasons, as some naive analysts have claimed).
According to the International Federation of Red Cross and Red Crescent Societies (IFRC), the economic crisis in Sri Lanka is turning into one of the country’s worst humanitarian crises in decades, with 6.7 million people, almost a third of the population, now in urgent need of humanitarian assistance. 2.4 million Sri Lankans are in dire circumstances due to the soaring cost of basic necessities.
According to IFRC’s latest update, millions of families face shortages of food, fuel, cooking gas, essential supplies and medicines, as the humanitarian impact of the economic crisis continues to increase. These are similar figures to the most recent assessment by the World Food Program and FAO, which points out that record food inflation of 90% is making even staples such as rice unaffordable, with the average monthly cost of a decent diet rising 156% since 2018. At least $63 million is needed to address the food crisis in the coming months, according to the WFP.
The crisis goes back a long way: it comes after COVID, which wiped out tourism revenues, the spiral of now uncontrollable debt due to bilateral loans (with China and India especially), and the careless issuance of treasury bonds hoarded by international investment funds, with unsustainable return rates. Then came the blow of the war in Ukraine, with decreased energy supply resulting in endless lines at the gas pumps.
The country’s course of action was dictated on Thursday, after several days of bargaining, by the Monetary Fund, which is on bad terms with the Rajapaksa family. But it was the solution Ranil Wikremesinghe, the new president (and finance minister), appointed by the previous one (who fled abroad) and no less hated by the protesters, had to choose. Only some of the protesters have gone home after the massive demonstrations that forced Gotabaya Rajapaksa to flee in July. The IMF and the Colombo authorities signed a document “to support Sri Lanka’s economic policies with a 48-month arrangement under the Extended Fund Facility (EFF) of about $2.9 billion.”
At what cost? In summary: “Raising fiscal revenue to support fiscal consolidation … major tax reforms [including] making personal income tax more progressive and broadening the tax base for corporate income tax and VAT,” with a projected primary surplus of 2.3% of GDP by 2025; “introducing cost-recovery based pricing for fuel and electricity to minimize fiscal risks arising from state-owned enterprises” (the Rajapaksas had introduced subsidies on some goods, including fuel); a reform of the Central Bank, fiscal consolidation and a policy of price stabilization, rebuilding foreign reserves, transparency, and fighting corruption. The agreement also adds a mention of measures for “mitigating the impact of the current crisis on the poor and vulnerable by raising social spending, and improving the coverage and targeting of social safety net programs.”
Really achieving this list of goals is a tall order. However, there are some things that might help.
Tourism could see a gradual revival. The Russians seem eager to lend a hand, since they are always looking for support that would translate into votes in the UN General Assembly. India and China, although not on the best terms with each other, are willing to review their debt policy. Finally, there are the international bodies that will inject money and goods to keep the crisis under control. But there are other threats competing for attention: the food emergency in Africa, or the one in Afghanistan which has even worse numbers than the Sri Lankan one. Not to mention the costs of the war in Ukraine, which threaten to take resources away from solidarity.
That leaves migrants’ remittances, which, in recent years, have been the only constant one could rely on in a country where there is greater and greater desire to leave and seek a better life elsewhere.
Originally published at https://ilmanifesto.it/sri-lanka-la-perla-in-trappola on 2022-09-02