Sri Lanka Sees Worst Economic Crisis Since Independence: A Timeline

The newly-appointed Ranil Wickremesinghe was sworn in as the 26th Prime Minister of the country replacing Mahinda Rajapaksa, who resigned amid widespread protests in the country. It's facing its worst economic crisis since 1948, when the country gained independence.

There's no food, no fuel, no power, leaving people anguished and angry. The island nation of 22 million people emerged from a devastating civil war in 2009, only to be rocked by Easter Sunday church bombings in 2019 before being hit hard the following year by the COVID-19 pandemic, which torpedoed its vital tourism sector.

AFP

Here's a short summary of errors that led to this mess, beginning November of 2019.

November 2019

After winning Sri Lanka's presidential election and months ahead of a parliamentary ballot that would again test his popularity, Gotabaya Rajapaksa announced sweeping tax cuts. The Cabinet cut the value added tax to eight per cent from 15 per cent and also abolished seven other taxes, including a two per cent nation building tax paid by businesses.

The sweeping tax cuts led to a credit rating downgrade in 2020, leading to Sri Lanka losing access to international financial markets. Sri Lanka started dipping into its foreign reserves to meet its debt obligations. This resulted in foreign reserves plummeting from a healthy level of $8,864 million in June 2019 to $2,361 million in January 2022.

AFP

Mid of 2020

The COVID-19 pandemic in March 2020 made the situation worse. Tourist inflows and tourism revenues fell further; exports of tea and rubber declined due to lower demand; and remittances, another booster to the foreign exchange reserves, also fell as Lankans across the globe lost jobs.

The GDP declined by 3.5 per cent, the Current Account Deficit touched 7.9 per cent of GDP, and the fiscal deficit climbed to 11.1 percent.

April 2021

While suffering economic hardships, the Lankan government on 29 April 2021 decided to ban the import of chemical fertilisers and any other agrochemicals to make the Indian Ocean nation the first in the world to practice ¡°organic-only¡± agriculture. The move was aimed at reducing pressure on forex reserves.

AFP

Agriculture experts strongly criticised the move as ¡°ill-advised¡± and ¡°unscientific¡±. The farming community expressed fears that such drastic policy shift could result in steep drop in yield.

November 2021

Facing protests and seeing a drop in agricultural output, the government blinked and said that it would partially lift the ban. However, the damage was done.

Tea cultivation, which is one of the mainstays of the economy, was also badly hit. The output of pepper, cinnamon and vegetables went down by 30 per cent. This forced the government to rely even more on foreign countries for rice and other staples.

March 2022

Hundreds of protesters, rallied by unidentified social media activists, try to storm the home of President Gotabaya Rajapaksa, demanding his resignation. Police fire tear gas and water cannon, and at least one man is critically injured. The capital is placed under curfew.

Sri Lanka Crisis

April 1, 2022

As protests spread, Rajapaksa declares a state of emergency, giving security forces sweeping powers to arrest and detain suspects.

April 2

Sri Lanka declares a 36-hour nationwide curfew and deploys troops. The order takes effect at dusk and was to be lifted on the morning of April 4, police say ¨C a period that covers planned mass anti-government protests.

April 3

The government briefly blocks access to social media before the ban is lifted following a ruling by the country¡¯s Human Rights Council.

Almost all of Sri Lanka¡¯s cabinet resigns at a late-night meeting, leaving Rajapaksa and his brother Mahinda, the prime minister, isolated.

AFP

April 4

Monday morning also saw trading on Sri Lanka's stock exchange being shut down. Additionally, Sri Lanka's central bank governor, Ajith Cabraal, announced his resignation.

April 5

Rajapaksa¡¯s problems deepen as Finance Minister Ali Sabry resigns just a day after he was appointed. The embattled president loses his parliamentary majority as former allies urge him to quit. He lifts the state of emergency.

WATCH: As Sri Lanka¡¯s curfew was lifted temporarily, people scrambled to stock up on essentials or crowded onto buses in hopes of returning to their hometowns before the restrictions set in again https://t.co/sPoY3tEZEK pic.twitter.com/u0qNfjyzBy

¡ª Reuters Asia (@ReutersAsia) May 12, 2022

April 9

Tens of thousands march on the beleaguered president¡¯s office in the biggest protest to date, demanding for Rajapaksa to resign.

April 10

Sri Lanka¡¯s doctors say they are nearly out of life-saving medicines, warning that the crisis could end up killing more than the coronavirus pandemic.

April 12

The country announces it is defaulting on its entire external debt of $51bn as a ¡°last resort¡± after running out of foreign exchange to import desperately needed goods. A finance ministry statement pledges ¡°fair and equitable treatment of all creditors¡± ahead of an IMF-assisted recovery programme.

AFP

April 18

The president unveils a new government, ousting two of his brothers and a nephew but keeping on his eldest brother Mahinda as prime minister.

April 19

Police kill a protester, the first casualty of several weeks of anti-government protests. The next day the IMF says it has asked Sri Lanka to restructure its colossal external debt before a rescue package can be agreed.

April 28

A nation-wide strike brings the South Asian country to a standstill.

Businesses and market stalls shut up shop in Sri Lanka's main city of Colombo as a curfew was reimposed following a few hours of respite. People have grown increasingly frustrated at disruptions to normal life https://t.co/LgIAqEU32h pic.twitter.com/UjQvba1Vel

¡ª Reuters (@Reuters) May 13, 2022

May 8

After a second strike, Rajapaksa declares another state of emergency.

May 9

The government sends troops onto the streets after several people are killed in clashes between anti-government demonstrators and supporters of the premier bussed in from the countryside, who are accused of attacking peaceful protesters. Mahinda Rajapaksa resigns as prime minister.

AFP

May 10

The defence ministry orders troops to shoot on sight anyone involved in looting or "causing harm to life". But protesters continue to defy the government curfew. The top police officer in Colombo is assaulted and his vehicle set ablaze.

May 12

Ranil Wickremesinghe, a political veteran who has been prime minister of the island nation five times before, faces the daunting task of leading his country through its worst economic crisis since independence.

Rajapaksa, whose elder brother Wickremesinghe replaced him as Prime Minister, has called nationwide curfews and given security forces sweeping powers to shoot at anyone involved in looting or putting people's lives at risk.

ranil

Meanwhile, a Sri Lankan court Thursday issued a travel ban on erstwhile prime minister Mahinda Rajapaksa, his son Namal Rajapaksa and 15 others. Mahinda is currently under protection at the Trincomalee naval base. The Fort Magistrate¡¯s Court barred them from travelling overseas due to the investigations taking place on the attacks on the GotaGoGama and MynaGoGama peaceful protest sites on Monday, Reuters quoted media reports as saying.

For more on explainers, news and current affairs from around the world, please visit Indiatimes News.