‘The Canary in the Coal Mine’: Sri Lanka’s Crisis is a Chronicle Foretold

by Eric Toussaint , Balasingham Skanthakumar

Sri Lanka’s acute economic crisis and sovereign debt default, along with its people’s uprising in 2022, has drawn attention across the world. It is described as the ‘canary in the coal mine’, that is, a harbinger of the likely future for other global south countries. Eric Toussaint, spokesperson for the Committee for the Abolition of Illegitimate Debt (CADTM) interviewed via email Colombo-based Balasingham Skanthakumar of the Social Scientists’ Association of Sri Lanka and the CADTM’s South Asia network. The responses in draft were improved by Amali Wedagedera’s review and finalised on 5th August.

What was the cause in Sri Lanka for the people’s uprising in 2022?

Sri Lanka ran out of foreign exchange in the first quarter of 2022. It exhausted its reserves, already depleted from defending the value of the Lankan Rupee (LKR), having serviced a USD500 million International Sovereign Bond that matured in January. New inflows to renew reserves, confidently assured by the Central Bank Governor on behalf of the Gotabaya Rajapaksa administration, did not materialise.

For decades, there has been a chronic balance of payments shortfall, such that import expenditure raced ahead of export revenue, two-to-one. This deficit has been financed by foreign borrowings (initially bilateral and multilateral loans, but increasingly the international money market from 2007 during the Mahinda Rajapaksa presidency). In fact, the so-called foreign reserves were almost entirely foreign loans and not national income. To maintain the LKR at an artificially high value for almost a year, the Central Bank drew down on its dollar holdings. Once the reserves were exhausted, the rupee went into freefall in March 2022. It lost 44% of its value against the US dollar, and around 40% against other convertible currencies between January and May 2022 alone. Presently the US dollar trades at LKR361, whereas in June 2021 it was LKR200.

Without foreign exchange, highly import-dependent Sri Lanka could not afford to purchase fuel (petrol, diesel, coal, kerosene, LP gas), food, and medicines. The shortages of fuel affected not only transport but also the generation of electricity, making previously rare power cuts a daily and prolonged occurrence from February up to the present. With shortages of food and other essentials in the market, queues of people formed everywhere. The price of everything rose sharply. By July, headline inflation surged over 60% – food having skyrocketed by 90% and non-food items by 46%. One in three persons is food-insecure: without adequate access to food or reducing the number of meals, the portion sizes, quality, and variety. Community kitchens have begun in Colombo with crowd-sourced funding to provide at least one meal a day in low-income areas, along with ad-hoc distribution of cooked food parcels.

Fuel shortages and power cuts also debilitate the productive sectors of the economy spanning farming, fishing, and factories. The livelihoods of daily-wage earners and urban poor households are devastated. The crisis has decimated the incomes of low-paid gig workers who run taxis and deliver food. The savings and retirement benefits of the middle and working classes have more than halved following devaluation of the rupee. Those on fixed incomes are losing ground to inflationary price hikes propelled by profiteering, without compensatory wage increase. Tens of thousands of mainly young people throng the passport office, their first step to find jobs abroad. Several hundreds have been intercepted at sea, trying to escape in unsafe and overcrowded fishing boats to India or Australia.

Public discontent over the brewing crisis was evident during the Covid-19 pandemic, with farmers, schoolteachers, garment, and plantation workers’ protesting in 2021, as did women victims of microfinance loans in 2020. There were set-piece anti-government demonstrations and rallies by opposition political parties but only mobilising the faithful. Meanwhile the government kept downplaying the seriousness of the economic problems. People across classes were disenchanted by a government that was indifferent to their pain and inactive even as they suffered. [1]

The Rajapaksa family that has dominated Sri Lankan politics since 2005 has been the object of both adoration and fear within society, depending on one’s ethnicity and political views. For the first time in a generalised way, stories of their abuse of power, attachment to astrologers, and unexplained wealth, became openly ridiculed. The demand for President Gotabaya Rajapaksa to “Go Home!” included the rest of his family too. This slogan was joined by another, “Give us our stolen money back!”. Even though cross-class grievances indicate a systemic crisis, the citizens’ movement that emerged in 2022 was largely framed by the middle-class belief that the mismanagement of the economy derives from grand corruption among politicians and bureaucrats.

This people’s uprising is heterogenous, without structure or leaders. It defies neat class labels. Its origin from within that inexact category of the “middle class” has shaped its character and consciousness. However, along the way it has become more diverse, receiving support from university students, daily waged workers, the urban poor, pensioners, people with disabilities, trade unionists, the clergy, and the LGBTQI community. Still, the active participation of the working class, farmers’, fishers’, and plantation workers, is minimal. Even the left-wing representatives of dominated classes who participate in it, have not been able to transcend the general demand within the citizens’ movement for short-term economic relief; nor advance an agenda beyond regime-change and liberal democratic and constitutional reform. [2] The left has neither programme nor strategy for the socio-economic transformation of society and working peoples’ power.

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