What do the food and currency crises hold in Sri Lanka?

After declaration of food emergency, island nation must navigate difficult situation

Sri Lankan President Gotabaya Rajapaksa’s promulgation of a “food emergency” in the face of a never-ending currency crisis has shocked locals and surprised friends and adversaries, both inside and outside the heartbreaking nation . Civil society activists have also not missed his appointment of an army officer, Major General NDSP Niwunhella, as Commissioner General of Essential Services, to ensure a regular and rapid supply of supplies. essential products; this is yet another example of the militarization of the civil administration under his regime.

The country’s financial difficulties had been known for years, starting with its predecessor, the “Government of National Unity” (GNU), under the dual leadership of President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe. Their government worsened the country’s financial woes after promising to ease and reverse the trend, inherited from predecessor president Mahinda Rajapaksa, now prime minister.

Foreign exchange reserves have been continuously squeezed as the Sri Lankan rupee (LKR) has continued to collapse over the past two decades.

In particular, foreign exchange reserves have been continuously squeezed as the Sri Lankan rupee (LKR) has continued to collapse over the past two decades. Yet Gotabaya’s regime cannot continue to blame the predecessor as it had nearly two years to rectify the situation, which however worsened with the government’s inability to contain the second and third waves of the pandemic. of COVID-19, unlike the first. wave.

Before COVID, the nation suffered from the economic consequences of the lavishness of the previous regime, compounded by political instability, which kept investors away. This was closely followed by the “serial Easter blasts” in 2019, which severely affected the tourism sector, one of the pillars of the country’s economy. Since then, the pandemic has reduced the exports and internal remittances of large numbers of Sri Lankans employed abroad, representing the largest tranche of foreign exchange inflows.

Inflexible stand

So the 2021 budget, presented by Prime Minister Mahinda Rajapaksa, who was also finance minister at the time, banned the import of food products, including turmeric and chemical fertilizers, allegedly to encourage local farmers and l organic farming, but it created more problems than it solved everything. The real idea was to save so much on foreign currency outflows, but the urgent and unforeseen import ban caused multiple crises at different levels from farm to food table. But President Gotabaya has refused to budge, regardless of the economic realities.

Gotabaya may be a capable military strategist, but he may not be a capable political and economic administrator despite his landslide victory in the presidential election and the parliamentary sweep of his SLPP a few months later.

Government supporters hoped that the enthronement of another Rajapaksa brother, Basil Rajapaksa, as finance minister in place of Prime Minister Mahinda, would help even as the “transfer of power” raised eyebrows in many circles. Between them, Mahinda as president and Basil as economic adviser, they had driven GDP to record levels, even at the height of the LTTE war at the end of the last decade.

That magic touch has disappeared this time around, President Gotabaya sticking to the political and economic dogmatism forged by his ideological collaborators. People quickly discovered that Gotabaya may have been a competent military strategist, but he may not have been a competent political and economic administrator despite his landslide victory in the presidential elections and his parliamentary sweep of the SLPP a few months later. late.

Rice vs. Rubber Pact

The presidential declaration on the food emergency and the accompanying ordinance aimed at suppressing the hoarding of basic necessities such as rice and sugar were closely preceded by the Minister of Finance Basile announcing the release of the massive stocks held in the port of Colombo, both because of the blockages and the intransigent attitude of importers. to claim concessions where they were not due.

Hoarding and black marketing have been used both for commercial exploitation and as a political tool to embarrass the ruling government. Ahead of the 2015 presidential elections which he lost to other causes, President Mahinda stored 25,000 tonnes of Bangladesh rice for intervention in the market if political hoarding was used to smear his candidacy. Recently, the government claims to have seized over 10,000 tonnes of sugar from three wholesalers. Their motivations remain unclear.

President Mahinda stored 25,000 tonnes of Bangladeshi rice for intervention in the market if political hoarding was used to smear his candidacy.

The government has also announced massive sanctions for hoarders, but that may not be enough to end the food panic and long lines at retail stores. The situation can only improve if the government injects more foreign exchange into the system after private banks have closed the doors to importers-customers for years, or accelerates lending from the International Monetary Fund (IMF), which it does. decided to apply, quite late.

Including Sri Lanka, Third World countries have felt that IMF conditionalities that demand a tight national belt do not suit the people and are therefore uncomfortable for elected governments, who, however, cannot resist them. Sections of Sri Lankan politics, economists and civil society have repeatedly blamed the late President JR Jayawardene for inaugurating “market capitalism” in the late 1970s for the continuing economic ills of the country. nation, which were, at times, seen as more than ‘socialist intervention’.

The government’s ability to import large quantities of food products, starting with rice and sugar but against long-term repayment agreements, appears to be the only alternative. Maybe all of Sri Lanka’s essential food items have to come from the rest of South Asia or East and South East Asia. The last time the nation faced its worst food crisis was in the 1950s after independence, when the equally nascent Communist regime in China proposed the “rice for rubber” pact.

Maybe all of Sri Lanka’s essential food items have to come from the rest of South Asia or East and South East Asia.

The pact involved China exporting rice to drought-stricken Sri Lanka, then Ceylon, at prices below international prices, and importing rubber from the other country at prices higher than the world market. The Sri Lankan state and its citizens have repeatedly thanked China enough for this distant gesture. Hence the continuation of ties with China, although it is trapped in the “debt trap” with the most recent “Hambantota agreement”.

Anyone can guess why the Rajapaksa diet, which the international community believes is being sold to China, has not taken this route to increase the food supply this time around. It is not unlikely that in the face of the most recent controversies over the Chinese-funded Colombo Port City project, the government could seek concessional food imports from other countries before declaring that Beijing alone was considerate, as it did. was when he sold fighter jets to fight the LTTE in the 1990s, without quoting a price or asking for a deposit.

Looking south for a landmark

Domestically, the food shortages that accompany the long shadow of the forex crisis and COVID “mismanagement” – as the opposition has accused the government – are sure to affect the popularity of the Rajapaksas in the country. to be able to.

More importantly, socialists and homeland security experts should watch the south to see if the current crises and the failures of successive governments over the past decades could spark a “social revolution,” including one of the Sinhala majority type. -Buddhist. Recall that at a time of world socialist boom, the Sinhalese majority youth in the south of the country had rebelled under the leadership of the child Janatha Vimukthi Peramuna (JVP), a left-wing separatist group founded by Rohana Wijeweera, one of the Lumumba University, Moscow.

The presence of the Indian Peace-Keeping Force (IPKF), which ended up confronting the LTTE in the north and east, freed Sri Lankan troops to quell the second JVP insurgency.

The two “JVP insurgencies” of 1971 and 1989 saw security agencies massacre thousands of Sinhala boys and girls of childbearing age. India directly assisted the government in suppressing the first insurgency. The presence of the Indian Peace-Keeping Force (IPKF), which ended up confronting the LTTE in the north and east, freed Sri Lankan troops to quell the second JVP insurgency.

After the insurgency, the emergence of the LTTE as an unparalleled international terrorist group helped the nation turn away from the south. However, successive governments have since convinced no one of their sincerity in solving ordinary man’s problems, nor have they convinced themselves that there would not be another social upheaval and another uprising of the earlier type with the national and family economy as the main objective, as seen in the past JVP, but with a new faceless generation of young leaders.

About Mike Stevenson

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