Beyond Ukraine, Sri Lanka is the epicenter of the global crisis

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The war in Ukraine may still dominate international headlines. But it is a country far from the battlefield that has turned into a kind of crucible of the global moment. For months, Sri Lanka has been in a downward spiral of economic death: the public debt crisis, exacerbated first by the toll of the pandemic and then by the turmoil sparked by the Russian invasion of Ukraine, has led to shortages of food, fuel, cooking gas, medicine, cash and other essential goods.

In a United Nations survey, about 70 percent of households in Sri Lanka reported cutting back on food consumption, with food price inflation at around 57 percent (as opposed to nearly 10 percent in the United States from the previous year). The country of 22 million people has run out of fuel somewhat, and new shipments are still days away.

Rising public anger and protests brought down the government of Prime Minister Mahinda Rajapaksa in May, but dire conditions persist and concerns are growing about the possibility of new clashes between security forces and angry ordinary civilians. Power cuts are now a standard part of everyday life, as are days of fuel lines. Schools and offices were closed at least for the week in an effort to keep Sri Lankans off the roads.

Last week, doctors, medical staff, teachers and bankers in the capital, Colombo, staged a rally to protest their inability to get petrol or diesel needed to do essential work. “Things have become unbearable for the common man,” an official at the teachers’ union told Reuters.

How a powerful family destroyed a country

Sri Lanka in May She failed to pay her debts For the first time in its history as an independent country. The caretaker government, led by veteran politician Prime Minister Ranil Wickremesinghe, is trying to get the country out of its troubles, including by seeking help from regional powers, India and China.

But the way forward remains bleak for a country unable to pay for its imports. The government has resorted to somewhat desperate pleas: it introduced a scheme to give government employees an extra day to grow crops in their backyards, and it offered all 1.5 million public sector workers in the country the possibility of five years of unpaid leave until they can do it. Find work abroad, immigrate and send much-needed remittances back home.

Lines at passport offices are now long, too, and the country’s online application system has been piling up for months. The most desperate are trying to escape by boat to neighboring countries such as India. Analysts likened the collapse of Sri Lanka’s economy to the financial chaos of the late 1990s in the major economies of Southeast Asia. Others warn of Sri Lanka’s transformation into a debt- and dysfunctional “Lebanon of South Asia”.

Ten days of negotiations that began on June 20 between the country’s interim government and officials from the International Monetary Fund over a possible rescue package ended last week without a solution. “In the past, we’ve had discussions as a developing country,” Wickremesinghe said on Tuesday. But the situation is different now. We are now participating in the negotiations as a bankrupt country. Therefore, we have to face a more difficult and complex situation.”

Inside the collapse of the Rajapaksa dynasty in Sri Lanka

Sri Lanka’s problems are, in many respects, unique to its situation and sinner. However, the country’s astonishing collapse is inextricably linked to a broader and intertwined series of global phenomena: the war in Ukraine pushed up global food and energy prices and pushed the difficult situation in Sri Lanka to the brink.

“Sri Lanka would be in crisis even if there was no war in Ukraine, but it’s exacerbating everything,” Alan Keenan, an analyst with the International Crisis Group consultancy, told my colleagues Jerry Shih earlier this year. “This is the Ukraine effect: The fuel credit line you thought could last two months now lasts one. Even if you get a bailout, you buy less food, less fuel, and less medicine.”

Similar pressures exist elsewhere. A joint report by international humanitarian organization Oxfam and Save the Children found in May that one person dies of starvation every 48 seconds in drought-stricken Kenya, Ethiopia and Somalia. The conflict in Ukraine has driven prices up to record levels and made food “out of reach for millions” of people in East Africa.

“The number of people suffering from extreme hunger in the three countries has doubled since last year – from more than 10 million to more than 23 million today,” the organizations noted in a statement. “This is against a backdrop of non-performing debt that has more than tripled in less than a decade – from $20.7 billion in 2012 to $65.3 billion by 2020 – sucking these countries’ resources into public services and social protection.”

Organizations also flatter the major Western powers for not doing more: “[Group of Seven nations] Other rich countries have turned inward in response to many global crises, such as COVID-19 and most recently the conflict in Ukraine, including rolling back their promised aid to poor countries and pushing them to the brink of debt bankruptcy.”

Indeed, for the United States and many of its European partners who are rallying around Ukraine, Sri Lanka is out of their focus. But leaders elsewhere are more concerned. Indonesian President Joko Widodo is said to have made his trip last week to both Kyiv and Moscow with the situation in Sri Lanka in mind. He urged an end to hostilities and pressured Russian President Vladimir Putin to ease conditions that have hampered important exports of grain and fertilizer.

“Indonesia’s ultimate goal is … to end the war in Ukraine,” Andrew Mantung, an international relations researcher at the Jakarta-based Center for Strategic and International Studies, told Nikkei Asia. “If that cannot be achieved, the second – and most achievable – goal is to find a way to reintegrate the Russian and Ukrainian food and fertilizer supplies into the global supply chain.”

In an interview with the Associated Press last month, the embattled Wickremesinghe said his government would consider getting Russian oil, regardless of Western sanctions. He bemoaned how the war in Ukraine had accelerated Sri Lanka’s “economic downturn” and warned that his country would not be alone.

“I think by the end of the year, you can see the impact in other countries,” he said. There is a global shortage of food. Countries do not export food.”

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