What is Happening in Sri Lanka, the Little Neighbor of the Almighty India?

Sri Lanka is a small island located in the Indian Ocean, a few kilometers from the southern coast of India. Despite its small size, news of its political and economic crisis has gone around the world. There is even fear of a domino effect.

What Is Happening?

This island of approximately 21 million inhabitants is experiencing a social explosion that requires a change of government. The protesters even invaded the house of the president, Gotabaya Rajapaksa, and set fire to the house of the prime minister. Rajapaksa had to resign in the face of nonconformity and fled the country with his family.

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However, despite the fact that the climax of these protests came this week, the crisis has been going on for several months of nonconformity. The former president will have to face several complaints of corruption and economic mismanagement that has left this small island in area, but with a high population density, on the verge of bankruptcy.

Why Was this Economic and Political Crisis Generated?

The reasons for nonconformity are not few. The country is experiencing a financial crisis unprecedented since its independence from Indian rule . The same prime minister, Ranil Wickremesinghe, warned since May: "The next few months will be the most difficult of our lives."

Since May, for the first time in its history, the country went into default by failing to pay its foreign debt. The president insisted that this occurred due to the tailwinds of the serious economic crisis left by the coronavirus, affecting the island's tourism industry, one of the main sources of income.

However, critics of the Rajapaksa government say that the current crisis is due to poor fiscal management, which has tilted the trade balance to the detriment of the Sri Lankan economy. According to El Español, the government has revenues of 1.6 trillion rupees, but expenditure is 4 trillion , leaving a constant deficit of 2.4 trillion. This has left the country without foreign currency and with a large debt, especially with China, which has financed a large number of mega infrastructure projects.

The economic situation is so serious that it is not possible to access any type of Western foreign currency, such as the dollar or the euro, which has made it difficult to import products, including food, fuel and even medicine.

This created chaos, since the Government tried to prohibit the sale of gasoline, given the shortage and the critical fuel reserve that the island had. This measure is an unprecedented event in the current century, and that no other country has had to face in the face of the fuel crisis. Added to these difficulties is inflation that has reached more than 30% in just 2022 and has no signs of slowing down.

What Is Coming in the Immediate Future?

Sri Lanka is currently undergoing a process of re-establishing democracy and electing a new Government . However, this will not solve the deep and serious damage that the economic crisis has left in a country without fuel, medicine and little electricity. Many point out that now Vladimir Putin, Russian president, sees this as a possibility of increasing Russian influence in this crucial area due to its geographical location in one of the seas with the largest trade and close to an emerging power such as India.

Additionally, there is fear of a possible domino effect. The world crisis, inflation and fuel shortages caused by the war in Ukraine, and the respective sanctions against Russia, have not only left Sri Lanka on the verge of collapse, there are also several countries with a similar scenario.

The Washington Post warned that Zambia, Lebanon and the nuclear power of Pakistan are going through similar scenarios that could end in a global crisis and with critical scope.