Sri Lanka on the Verge of Economic Collapse: When Family Takes Over Government

Fabrizio Montisci, Staff Writer

On April 12, the government of Sri Lanka announced via a press release statement that it would be suspending its repayment of all foreign debt, while attempting to convince the International Monetary Fund (IMF) to establish a suitable loan restructuring program, prompting the country to go bankrupt. This came after weeks of economic hardship, as well as important shortages on almost all essential goods and services, and runaway inflation.

While the sources of such an economic crisis are numerous, a few factors can be identified as particularly influential. As of today, Sri Lanka does not have the necessary funds to pay off $7 billion in foreign debt due this year alone out of a total of $25 billion, according to NPR. For decades, Sri Lanka has borrowed funds from foreign countries to finance important infrastructure projects. However, after years of lavish government spending, the COVID-19 crisis forced the small island off the coast of Southern India to block its profitable tourism industry, also hindering the country’s capacity to pay off its foreign debt. What began quietly has quickly deteriorated into Sri Lanka’s worst economic crisis since the country gained independence in 1948, as pointed out by Joe Wallen, The Telegraph’s global health correspondent. This has since sparked widespread protests demanding President Gotabaya Rajapaksa’s resignation. 

Lines for cooking gas, fuel and food are becoming the norm in Sri Lanka and people are growing more and more frustrated, waiting under the country’s scorching heat and the constant night-time power cuts, also caused by fuel shortages. Sri Lankans, especially the youth and the middle class, are now filling up the streets of the capital, Colombo, in an attempt to have their voices heard. While the protests have mostly been peaceful, Rajapaksa’s government is known for its repressive behavior against the opposition. Following a European Parliament resolution confirming such behavior, there are increasing fears that the country’s military might start intervening to suppress protests.

As a matter of fact, Rajapaksa’s government is not simply known for its aggressive attitude toward the opposition, but also for being his family’s playground for over a decade. Not many countries can pride themselves on having such an intensely nepotistic government. For years, the Rajapaksa family has strengthened their grip on the country’s administration on a capillary level. As of today, the Rajapaksa family, with its ministerial and governmental appointments, has control over 75% of the country’s total budget, according to WION News. Beginning in 2019, the year of his election, President Gotabaya Rajapaksa has appointed his own brother, former President Mahinda Rajapaksa, as Sri Lanka’s prime minister; his nephew, Namal Rajapaksa, as minister of youth and sports; and yet another nephew, Shasheendra Rajapaksa, son of MP Chamal Rajapaksa, as state minister of paddy and cereals, organic food, vegetables, fruits, chilies, onions and potatoes, seed production and high-tech agriculture. Even the Ministry of Finance, up until April 4, couldn’t escape the Rajapaksa family as Basil Rajapaksa was the minister of finance. The list of Rajapaksas in government, of course, does not end here. 

The current economic crisis made the people of Sri Lanka more aware of their government’s mishandling of the country, causing them to become increasingly less patient with the Rajapaksa family and their incapacity to provide even the most essential services to their citizens. Shathurshan Jayantharaj, head of a fleet of delivery trucks, told The New York Times that the Rajapaksa family “does not know what it’s doing, and they’re taking us all down with them.” In an attempt to steer away the attention from himself, instead of taking full or partial responsibility for his government’s mismanagement of the economy, President Rajapaksa has accused “reasons beyond our control” for the current crisis. His words had the opposite result and only helped intensify the growing opposition to his family’s regime. Surav Harris, a student interviewed by Insider News, stated, “We want accountability. It’s not just resignation that we want. … We want these leaders to take accountability for their actions.” While demands for structural and economic reformation are growing closer to demands for regime change, and as the current crisis in Sri Lanka is successfully bringing together people from all religious and ethnic backgrounds against one compact cause, President Rajapaksa is becoming growingly isolated and seemingly desperate. In an address to the nation, aired on April 12, Prime Minister Mahinda Rajapaksa complimented himself and his government for building “highways, modern roads and infrastructure” and added that the blame for the current crisis is uniquely to be associated solely with the COVID-19 pandemic rather than with his government’s policies and centralization. In an ineffective and predictable fashion, Prime Minister Rajapaksa attacked his critics and accused them of prioritizing party affiliation over government unity. 

While protests continue, a reshuffling of ministerial appointments is taking place in an attempt to decentralize the Rajapaksa family’s control over the country and to install more capable figures. When asked by Bloomberg Markets: Asia about what steps Sri Lanka should take next to preserve the economy, incumbent Minister of Finance Ali Sabry, who took over Basil Rajapaksa in April of 2022, stated, “We need immediate emergency funding to get Sri Lanka back on track,” and added how important this step is before working on reforming the economy and restructuring the country’s debt. But as important as this step is, “a stable government matters” in the IMF’s decision on whether to support Sri Lanka or not, as confirmed by Steve Cochrane, chief Asia-Pacific economist at Moody’s, to The Financial Times. What the future holds for Sri Lanka and its people’s demands is uncertain. What is certain is that the longer this political and economic crisis lasts, the more impactful it will be on the state’s ability to provide essential services to its people and its legitimacy to request assistance from the IMF.