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Milk sachets, chicken, fuel: basics slip out of reach for Sri Lankans as economic crisis bites

Hannah Ellis-Petersen in Colombo

The country is in the midst of one of the worst financial crises in decades, exacerbated by a tourism collapse in the wake of Covid

In recent weeks, Shamla Laxman, 54, has been rising at dawn or staying out late at night. She is on the prowl for an item that has become rarer than gold dust in Sri Lanka’s commercial capital of Colombo in recent weeks: sachets of milk powder.

“These days it’s become impossible to find, and when you do find it in a shop, the prices are so expensive, double or triple what it was before, that I can’t afford it for my family,” said Laxman, who feeds a family of seven in her small house.

Chicken, which used to be a staple, is now a luxury item after it more than doubled in price. “All our basic items have become almost unaffordable now,” said Laxman. “Every day I am fearful of not being able to feed my family tomorrow.”

Sri Lanka, an island off the southern tip of India, is in the midst of one of the worst financial crises to hit the country since it became independent in 1948. In recent month, food prices have skyrocketed, there has been a continued dearth of essential goods, fruit and vegetables, and long queues have formed outside petrol stations due to a shortage of fuel. This week, daily power cuts of over five hours began to be imposed across the island and warnings were issued that water supplies might also soon be disrupted.

Last week two ships carrying diesel and a tanker of fuel oil sat in the port but their essential cargo could not be brought in as the government didn’t have the dollars to pay for it. Over the weekend, Gemunu Wijeratne, President of the Lanka Private Bus Owners’ Association, warned that buses were not being given enough petrol to continue functioning and that journeys were already being shortened.

People queue to buy Liquefied Petroleum Gas cylinders in Colombo as shortages of essentials gripped the island
People queue to buy Liquefied Petroleum Gas cylinders in Colombo as shortages of essentials gripped the island Photograph: Ishara S Kodikara/AFP/Getty Images

“If this continues, public transport will collapse and the economy will come to a standstill,” said Wijeratne.

It is a crisis many say has been over a decade in the making but was exacerbated by the pandemic and economic policies of the current government, led by president Gotabaya Rajapaksa who came to power in late 2019.

Consecutive governments have borrowed high-interest sovereign bonds, which coupled with billions in loans from countries including China and Japan have left Sri Lanka with cripplingly high foreign debt repayments. It has been operating with a $6bn trade deficit, importing far more than it exports, and invested billions in expensive, large-scale infrastructure projects.

“We have been spending beyond our means for years,” said Ahilan Kadirgamar, a sociology professor at the university of Jaffna.

A fruit vendor waits for customers in Colombo
A fruit vendor waits for customers in Colombo Photograph: Ishara S Kodikara/AFP/Getty Images

As the pandemic hit, Sri Lanka lost crucial foreign income from tourism, and tax cuts by the Rajapaksa government meant that the flow of federal income was severely reduced. Over the past two years, inflation has surged, foreign reserves fell by 70% and an ill-advised outright ban on fertilisers crippled the farming industry, leading to an ongoing shortage of fruit and vegetables.

Sri Lanka now owes $15bn in foreign bond repayments, with $7bn owed this year and a $1bn repayment required as soon as June, all to be paid in dollars. But with Sri Lanka’s foreign reserves at their lowest levels in years, and the country’s economic rating in the gutter, there are barely any dollars left and many fear the country is headed for a default. “The situation here is very bleak,” said Kadirgamar.

The impact on the daily lives of people, from lowest income up to the country’s wealthiest, is palpable. Nishan Shanaka 40, is a civil engineer in Colombo but he now drives an auto-rickshaw in the evenings and on the weekends because his salary won’t cover the cost of food and his children’s education. He described his family’s struggle to afford flour and bread and said they now existed on cheap vegetables.

“The cost of everything is far too high now, even if I go to buy a toffee it’s unaffordable,” said Shanaka. “The high fuel prices are impacting everything, my daughters can’t even get the school bus because they can’t afford to run them any more.”

Thangarasa Vathani, 48, owner of a fabric and tailoring shop, said she had already had to close one of her tailoring factories, and let go several members of her staff. The few left now worked from her home, but she was concerned she wouldn’t be able to keep them on for much longer. “People here are so disturbed, we don’t know what will happen tomorrow. Those who can afford it are sending their children abroad but not all of us have the money to do that,” said Vathani.

A child studies besides a lit candle at her residence during a power cut in Biyagama, a suburb of the capital Colombo
A child studies besides a lit candle at her residence during a power cut in Biyagama, a suburb of the capital Colombo Photograph: Ishara S Kodikara/AFP/Getty Images

The crisis is already affecting industry. Lawrence Wilson runs a lucrative noodle-making factory but has had to cut back production to alternative weeks because the necessary supplies have stopped coming in. “The situation here is dire and it’s only getting worse,” said Wilson, who said he spent his nights trying to find petrol for the car. “Groceries that used to cost 2000 Sri Lankan rupees are now costing 5,000 rupees. I don’t know how people on lower incomes are surviving.”

There are many signs that the economic crisis is turning Rajapaksa’s core voting base, the Buddhist Singhalese majority, against him. An editorial in the daily newspaper Daily Mirror last week ran with the headline “Empty treasury, power cuts, fuel shortages and nonsense”.

His government’s failure to restructure their foreign loans and refusal to turn to the International Monetary Fund (IMF) for an emergency loan as Sri Lanka has done in the past – likely over fears they would impose stringent cost-cutting conditions which would be politically unpopular – has angered many, who now see it as too late. The government is still placing its hopes on the return of foreign tourism and a rise in exports, but experts say it’s unlikely to solve the crisis.

“I blame this government,” said Shanaka, who voted for Rajapaksa. “I work hard at a garment factory supplying foreign brands like Nike and Victoria’s Secret and Lulu Lemon. We bring good foreign income into Sri Lanka, but the government has wasted it all away with bad policies. It is a terrible time for this country.”

The Guardian

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