Sri Lanka's multi -crisis breaks difficult

Sri Lanka's multi -crisis breaks difficult

The results of poverty reduction for several years or even decades may be destroyed

【International Observation】

Recently, Sri Lanka, the Indian Ocean island, has fallen into a multiple crisis of economic, social and political crisis, and has become the focus of attention from the international community. Once upon a time, Sri Lanka, which was superior in geographical location, rich natural resources, and beautiful marine scenery, was known as "the bright pearls on the Indian Ocean". However, the overlapping resonance of multiple internal and external factors has caused Sri Lanka to fall into many crises. At present, all parties in Sri Lanka are brewing a new government. How they cope with the current crisis are worth observing, and the overall prospects are not optimistic.

The root cause of the crisis is profound

Right now, Sri Lanka is deeply crisis in economic, social and political crises, but the economic crisis is the general cause and fuse of social crisis and political crisis. Therefore, we can understand the current Sri Lanka situation in order to clarify the economic crisis and its roots.

Since 2022, Sri Lanka has appeared in food, fuel and drug shortages due to insufficient foreign exchange. Grain shortage has rapidly triggered soaring grain and food prices; fuel shortage not only leads to the difficulty of refueling motorcycles, cars and other transportation of ordinary people, but also causes severe power outages nationwide and affects the lives of industrial production and residents. For general people's medical demands, some dangerous patients even face life -threatening. Although the Sri Lanka administration has adopted measures such as reorganization of government, seeking assistance from the International Monetary Fund, and finding support through bilateral channels, it failed to reverse the deterioration of the economic crisis, which eventually triggered the worst economic crisis since the founding of Sri Lanka. On July 5th, the Sri Lankan Prime Minister Vikramaxa said in his speech that "the Sri Lanka country has bankruptcy, and the economic crisis of food, energy and drug shortage will last until the end of 2023."

From the perspective of perspective, the economic crisis of Sri Lanka can be described as the result of long -term and short -term, internal and external multiple factors. From the analysis of long -term factors, the economic structure of Sri Lanka is unreasonable and excessive dependence on the outside world is the root of the economic crisis. Sri Lanka's agriculture is mainly based on planting economy, with high production costs and low productivity. It mainly produces tea, spices, seafood and coconut, and needs to import a large amount of food every year. Industry is mainly labor -intensive light industry, with weak industrial foundations, underdeveloped capital and technology -intensive industries. The main industrial finished products need to be imported. The service industry includes hotels, retail, catering, logistics, tourism, and financial services. Among them, tourism is an important source of foreign exchange. Obviously, Sri Lanka needs a large number of foreign exchange to pay for imported industrial products, food and energy, and the export exchange capacity is obviously insufficient. Its foreign exchange pillar tourism industry is easily affected by the international economic environment.

Because of this, the Sri Lanka authorities have borrowed money from the International Financial Organization in the 1960s to maintain economic operation and development, which created the "double deficit" situation of Sri Lanka's fiscal deficit and trade deficit. In other words, Sri Lanka's national expenditure exceeded its national income and was forced to rely on foreign debt and international capital inflows to maintain operation. At present, Sri Lanka's total foreign debt is as high as $ 51 billion. In order to repay debts, the Sri Lankan government has continued to use foreign exchange reserves to repay debt in the past two years, which led to a 70%of its foreign exchange reserves. The remaining foreign exchange was not enough to buy food, oil and other necessities, which detonated the economic crisis. In May 2022, the Sri Lankan government announced the suspension of international debt that expired that year. In addition, the Sri Lankan administration began to expand local currency supply as early as December 2019, leading to high inflation. In May 2022, the inflation rate of Sri Lankan had reached 40%of the highest level of history and continued to rise. Some economists believe that the actual inflation rate of Sri Lanka may have reached 100%.

Multiple factors inside and outside stimulate the crisis outbreak

From the analysis of the internal short -term factors, the Sri Lankan government introduced the reduction of tax reduction policies in 2019, not only reduced the value -added tax from 15%to 8%, but also canceled a series of tax projects such as construction tax. Although this move is widely welcomed by the public, it has led to a significant decline in government fiscal revenue and weakening the Sri Lankan government's financial and debt sustainability.

Subsequently, the Western international rating agency reduced the credit evaluation of Sri Lanka, which not only caused Sri Lanka to be difficult to raise funds in the international financial capital market, but also caused orders for clothing and tea of ​​multinational companies to flow to other Asian countries. In addition, the Sri Lankan government has fully implemented organic agriculture and has issued measures to prohibit import fertilizers, pesticides and herbicides, which has greatly reduced agricultural output. Since then, although the government has canceled the fertilizer import ban, the relevant import subsidies have also been canceled, which has led to surge in the price of chemical fertilizers, the phenomenon of food shortage continues, and the government is forced to spend more foreign exchange imports of food.

From the analysis of external factors, the spread of new crown pneumonia and the conflict of Russia and Ukraine is an important fuse of the economic crisis of Sri Lanka. Since the outbreak of the new crown pneumonia in 2020, the number of tourists in Sri Lanka, especially the United States and Europe, has decreased sharply, which has led to severe damage to the country's tourism industry. Only foreign exchange losses in the tourism industry will reach billions of dollars each year. In February of this year, the outbreak of the Russian -Ukraine conflict caused the Sri Lanka's economy to worsen, which to some extent became "the last straw that overwhelmed the camel." First, the source of foreign exchange is severely damaged. The tourism industry can be described as a Sri Lanka foreign exchange pillar, accounting for 14%of foreign exchange income. Both Russia and Ukraine are important tourists from Sri Lanka. In January of this year, Russia and Ukraine traveled to Sriors accounted for a quarter of the total number of tourists traveling in Sriors. In addition, Russia is still the second largest tea export market in Sri Lanka. In short, the Russian -Ukraine conflict has further weakened Sri Lanka's foreign exchange capacity in terms of tourism and agricultural exports. Second, impact food imports. More than 40%of Sri Lanka's grain imports from Ukraine, the conflict has caused the food supply from the direction of Ukraine. What's more serious, the Russian -Ukraine conflict has also led to rising commodities such as food and energy such as food and energy worldwide. The above -mentioned products in Sri Lanka depend on imports. In order to maintain normal economic operation, the government has been forced to spend more foreign exchange costs. The Sri Lanka's new government is very difficult to break the situation

The Sri Lankan economic crisis triggered a wide range of social crises and political crises. In May, in order to cope with the continuous protest demonstration and the pressure of the opposition, the President of Sri Lanka Gotapa Rajapakksa announced the reorganization of the government, replaced the president, and tried to build a political crisis at the moment with the opposition to build a joint government. However, the new Prime Minister Vikramaxa is also helpless in the crisis.

On July 5th, the new Prime Minister Vikramainha announced the bankruptcy of the Sri Lankan country. The move once again detonated the emotions of the people, and the demonstrators from all over the Sri Lanka subsequently poured into the capital Colombo, breaking through the police blocked and controlled the Presidential Palace and the Prime Minister's Palace. Since then, the president and the Prime Minister have announced their resignation. After the negotiation of the main party in Sri Lanka, it has decided to set up a cross -party interim government and hold a new government for parliamentary elections as soon as possible. On July 12, it was reported that Sri Lanka President Gota Baya Rajapaksa had taken the opportunity to leave Sri Lanka, and the main opposition party's "unified people's power party" leader Premadsa has publicly announced that he will run for president. In the future, no matter who comes to control the government, he has to start to deal with a series of challenges immediately.

First, how to restore the public's confidence in election politics? Different from the previous protests against specific political parties and leaders, the demonstrators aimed at all political parties and political families in Sri Lanka. In response, Jaciadewa Wanogoda, a professor of political science at the University of Sri Lanka Kellenapo, said: "The entire political class of Sri Lanka has lost public trust, and the contradiction between the political class and the citizen of political awakening is very sharp. Sri Lanka will continue to face turbulence. "

Secondly, how to get rid of the severe economic crisis? As mentioned above, Sri Lanka is facing the most severe economic crisis since 1948. Some economic experts predict that Sri Lanka's economic stagflation currently represented by low growth, high unemployment, and high prices will last for a period of time. Some economic institutions predict that the Sri Lanka economy may shrink 4%to 6%this year, which is more serious than the economic damage of the new crown pneumonia epidemic in 2020. Sri Lanka is stepping up to negotiate with potential international rescuers such as the International Monetary Fund to obtain at least US $ 3 billion in emergency capital support to pass the difficulty. However, even if it can reach a assistance agreement, this is a bitter fruit for Sri Lanka. While assisting the arrival, the International Monetary Fund requires the Sri Lankan government to raise taxes and interest rates, reduce subsidies such as interest rates, reduce power and food, and reduce public expenses, and take measures to further reduce barriers to foreign investors. In this regard, local economists in Sri Lanka said that if the new government is forced to accept the conditions of the International Monetary Fund, the results of the poverty reduction of Sri Lanka in the past few years or even decades may be destroyed, and the country's future economy will face long -term and larger. Uncertainty.

(Author: Wang Shida, the deputy director of the South Asia Institute of the China Institute of Modern International Relations)

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