Sri Lanka Crisis: Why You NEED To Be Paying Attention To It!!

When does economic hardship turn into Revolution when do people risk it all to Overthrow the status quo Tricky questions but we can get some of Our best answers yet from what’s been Happening in sri lanka In my video today i’m going to tell you Exactly what’s taken place so far and How the country got to where it is I’ll also go through some of the Implications for other countries that Could be in similarly precarious Positions This is a video you can’t afford to miss [Music] In case you’ve been living under a rock For the past couple of months you’ll Have seen that sri lanka has been Through a revolution a revolution Involving protests which eventually Resulted in the presidential palace Being stormed and the president got a Buyer rajapaksa fleeing the country Now we’ll get to all of that but before We do we need to take a look at sri Lanka’s recent history In short sri lanka has been ruled by one Political family for almost 20 years These are the rajapaksas who first came To power back in 2004. This was when mahinda rajapaksa the Elder brother of the now ex-president Was appointed prime minister he was Quite the populist and projected himself

As the people’s man In 2005 he was elected president and one Of his primary goals was to put an end To the three-decade-long sri lankan Civil war He succeeded to this end and eventually Crushed the tamil resistance fighters in 2009. Now despite what some people may think Of this the majority of the sri lankan Population saw it as a victory for Stability And i should also add that at about this Time gotta buyer was serving as a Powerful military strategist and defense Official So it was the role that the brothers Played in ending the civil war that Earned them the support of the broader Majority sinhalese population Despite briefly losing power in 2015 to The opposition party the brothers made a Comeback in 2019 That was due to their promise of Stability again in the wake of the Easter day bombings in which 250 people Were killed this time as a result of Islamic terror This played well in a country scared of Isis and with the civil war still fresh In its mind And this time it was gotta buyer who Eventually became president He then appointed his brother yes the

Previous president as prime minister And he also handed key positions to Several other members of his family Never a good idea That’s because with only loyalists and Yes men in the government the president Was never told that some of the ideas he Had were just plain stupid And if he was told then the individual Doing the telling was sacked As a result a lot of mistakes were made One of the earliest of these even before Gotabaya became president was the Reliance on chinese debt to finance Wasteful expenditure These short-term loans came with onerous Terms and were used to build things like An airport no one flies to and a cricket Stadium no one uses to a cricket loving Brit that second one really is beyond The pale Anyways total estimates for the Outstanding chinese loans are between 5 And 10 billion dollars this is on top of The other 51 billion dollars owed to Other nations And fun fact in 2018 sri lanka defaulted On one of its loans to china and as a Result had to sign over a strategic port In the south of the country to china on A 99-year lease now part of the way in Which sri lanka was able to service its Debts and maintain a standard of living For its people was through one of its

Main sources of foreign income tourism And while the easter day bombings were a Blow to the tourism sector it was the Pandemic that really reduced that Particular income stream to a trickle With the collapse of the tourism Industry in sri lanka the government was Left facing a balance of payments crisis Essentially it was importing way more Than it was exporting and this meant That it had to restrict some of those Imports or risk not being able to pay For them One imported product upon which the Country was most reliant was of course Fuel Sri lanka imported nearly all of its Fuel and when funds started running dry So too did the pumps Fuel is unsurprisingly essential in sri Lanka not only for filling cars but for Generating power Fuel cuts have resulted in months of Rolling blackouts across the country Even those able to afford the now Expensive fuel had to spend hours or in Some cases days waiting in line The government was forced to impose Rationing though even this has not been Enough to prevent shortages While many were hopeful that more fuel Would eventually arrive the government’s Energy minister was forced to admit that There weren’t the funds there to pay for

It The shipments would cost 587 million dollars but the government Only had 120 million dollars in the bank It’s also in debt to food suppliers to The tune of around 800 million dollars It’s not only fuel though as there is Also a shortage of cooking gas This is essential for a lot of sri Lankans who use it to cook in their Homes and have had to resort to open Fires to prepare their food Of course given that fuel is one of the Biggest components of the cost of many Goods and services this has contributed To some pretty sky-high inflation In june of this year the government Reported an inflation rate of 54.6 This was compared to 29.8 That was reported in may and that’s if You even believe all of these official Inflation figures that governments put Out Of course the attempts to solve the Country’s balance of payment problems Were all in vain and that’s because not Only did the country not have enough Dollars to import vital goods it also Didn’t have enough in reserve to pay the Interest on its outstanding sovereign Debt The result was the first sovereign debt Default in sri lanka’s history something That completely tanked its credit rating

And locked it out of any further Financing So it’s an altogether torrid time for The people of sri lanka However was it this fuel crisis that led To the protests was it the balance of Payments crisis that caused people to Take to the streets Well i don’t think so at least not Directly The biggest catalyst has to be food Shortages When the choice is between arrest or Potential death at a protest it’s still A better outcome than certain death from Starvation In sri lanka people are struggling to Find their next meal and many are going Hungry now this seems counter-intuitive For a country that seems to have Abundant arable land and is a large Producer of staples such as rice and Vegetables Well these shortages are all thanks to Some pretty ill-advised government Environmental policy the seeds of which Were sown over a year ago Allow me to explain In april last year the sri lankan Government implemented a ban on Synthetic fertilizers The rationale for this ban was that These fertilizers could be harmful and That farmers should consider organic

Alternatives I should also add that the movement to Ban these fertilizers is worldwide and One can only assume that the sri lankan Government assumed it to be a sound Environmental policy Beyond that lay the hope that the ban Would help to lessen the country’s Balance of payments problem by Eliminating the 400 million dollars that Was being spent annually on these Fertilizers Remember this number as we’ll come back To it in a bit Either way nearly every farmer and Industry expert told the government that This was a bad idea If they were indeed looking to Eventually transition to organic Fertilizer then there should be a Process of phasing in However the government’s ban came into Effect overnight and without any Consideration Of the country’s food supply In june of last year a group of 30 food Security and farming experts informed The government of the substantial loss In harvest that could be seen should the Ban not be reversed Here you can see a table that they drew Up with the estimates of how much the Harvest could fall as a result of this Ban

It’s safe to say that these concerns Were ignored In fact they were even suppressed That’s because a minister who criticized The policy earlier this year was Dismissed from his post with immediate Effect Of course you can see how all this Played out the ban had exactly the Effect that the critics had predicted And in some cases it was even worse For example last year the output of Grain in the country fell by 43 That’s right it almost Halved this meant that those sri lankans Who ate rice now had to import that rice To make up for the shortfall Remember that 400 million dollars that The government wanted to save on the Balance of payments well to make up for The shortfall in rice it had to import 450 million dollars worth of it talk About shooting yourself in the foot But if that was shooting themselves in The foot then the impact on t exports Was blowing a leg off that’s because tea Was one of the country’s most stable Exports and foreign currency earners Exports totaled 1.3 billion dollars and Sri lanka was responsible for about five Percent of all global tea production It turns out that the tea farmers were Also quite dependent on fertilizer who Would have thought it

So tea production has fallen by an Estimated 18 in sri lanka down to its Lowest level in over 23 years Now the impact of the ban on synthetic Fertilizer has also not been uniform Across the country some places have been Hit harder than others For example in rajanganaya where most Farmers operate only a small plot of Land many told the guardian that they Had seen a reduction of fifty to sixty Percent of their harvest According to farmer vermugiti de silva Quote before the ban this was one of the Biggest markets in the country with tons And tons of rice and vegetables But after the ban it became almost zero If you talk to the rice mills they don’t Have any stock because people’s harvest Dropped so much The income of this whole community has Dropped to an extremely low level Now this of course points to another Issue Not only has the ban impacted on the Food supply of the whole country but It’s also hit the incomes of hundreds of Thousands of small farmers Those who were least likely to be able To switch to organic fertilizers even if They wanted to These farmers have now decided that Given that they can’t get much from Their fields they’re going to abandon

Them entirely by some estimates this Could result in a further 50 percent Fall in rice production this year This entirely predictable fall in the Production of food in sri lanka is Perhaps the reason why the government Decided to reverse the fertilizer ban In an interview with bloomberg news Earlier this year the president even Admitted that it was rolled out too Quickly of course that did little to Quell public anger the food and fuel Crisis tore open old wounds and the Protests intensified They even breached the presidential Palace which led to dramatic scenes such As this President rajapaksa fled the country First flying to the maldives and then on To singapore he resigned while in exile Emailing his resignation to the Country’s parliament We can be pretty sure that he as well as The likes of ashraf ghani who fled Afghanistan are going to be living the High life while poverty and strife Remain in the countries they abandoned That aside the new president has just Been elected and he is well the ex-prime Minister This was not something that many people Wanted to see and it further adds to the Frustration at a status quo that appears To be entrenched in many governments

Around the world and speaking of the Current sri lankan prime minister Something else i found interesting is That he wrote a blog post on the world Economic forum’s website back in august Of 2018. Quote this is how i will make my country Rich by 2025. That as they say Hasn’t aged well Fantasy predictions aside the new President is going to struggle to regain Control and restore a semblance of Normality firstly he predicts that the Food crisis is likely to last well into 2023 and even then i think that’s an Optimistic timeline the government also Has to sort out its finances and it Seems that here it is going to have to Sup with the devil That’s because sri lanka is trying to Secure a bailout from the international Monetary fund or imf If you’ve never heard of the imf and What it does then my video on the topic Is well worth watching that will be in The description Now the imf is actually quite busy at The moment as it’s also engaged in Negotiations with pakistan over another Debt deal hey loan sharks got a loan Shark right Anywho back in june the imf was in Colombo for talks with sri lanka’s

Government the delegation left without a Deal being sealed That’s because there are a number of Things that need to be agreed by the Government before a bailout can be given For one there’s the question of whether Sri lanka can actually pay the funds Back And if so will it implement the reforms That the imf stipulates Those who have had to live under imf Reforms in the past we’ll know exactly What these could be like specified Limits on fiscal deficits and surplus Which could further damage economic Growth There’s also an understanding that the Country needs to work with global Bondholders and bilateral creditors to Whittle down that existing debt And remember who is sri lanka’s largest Creditor Yep china While official statistics show that China holds about 10 of sri lanka’s debt Many claim that the number is actually Closer to 20 I’ll link to this paper below which Gives a more accurate picture of chinese Lending in the country What this basically means is that sri Lanka won’t be able to get out of its Current crisis without china China needs to agree to the debt

Restructuring plan which is not its Usual path of conquest it prefers Infrastructure as collateral And it’s not like sri lanka hasn’t tried According to what the ex-president said In june it couldn’t tap a 1.5 billion Credit line from the chinese and wasn’t Able to take out a 1 billion dollar loan Anywho according to the new president Negotiations with the imf are quote Nearing conclusion and discussions with Donor countries are also progressing Let’s hope for the sake of the sri Lankan people that they’re able to come To some sort of resolution Okay so there are many of you out there Who are perhaps thinking what does this Have to do with me Well that’s because today it may be a Problem for sri lankans but tomorrow it Could be a problem for you as well Firstly there are a lot of countries That are in similarly precarious Positions to sri lanka Developing countries that mismanaged Their finances and were wrecked by the Pandemic restrictions Countries that also have had food Shortages and volatile politics I just mentioned that pakistan is Getting a loan from the imf but there Are also countries in the middle east And africa that are struggling too Countries that are historically unstable

And prone to unrest May i remind you that the arab spring Which kicked off in egypt in 2011 was in Part caused by a shortage of bread Lebanon is going through unprecedented Inflation and economic strife and like Egypt it’s heavily dependent on wheat Coming from ukraine and russia As you will no doubt know the war in Ukraine has left global wheat exports in Dire straits more about that in the Description The point is when you have revolution And instability in these regions it’s Hard to contain People will leave their countries in Search of employment and better Prospects elsewhere This leads to mass migration which could Further add to strife in other countries Where resources are already stretched Let’s not forget the summer of 2015 in Europe And speaking of europe the global food Insecurity question is no longer just an Abstract concept for the west There are legitimate concerns in Developed countries that they could soon Be facing shortages and if there’s one Thing that we’ve learned from sri lanka It’s that governments that try to Implement idealistic environmental Policies often do so without Consultation with those who said

Policies impact This is something that appears to be Playing out in the netherlands with the Recent pharma protests in this case the Government was trying to slash emissions Of nitrogen oxide and ammonia by capping Livestock farming Of course what happens if they get their Wish and farmers reduce cattle numbers At the expense of food security when do The protests start to involve more People than just farmers Will a lack of food eventually lead to Political revolution thankfully though Unlike in sri lanka europe isn’t facing A large-scale energy crisis right Now i don’t mean to pick on europe as It’s clear that there are many regions Facing economic challenges therefore It’s important to study the collapse of Countries like sri lanka because it can Be incredibly instructive as to how we Avoid such disasters happening closer to Home I hope that this video was able to shed Some light on that and that’s about it For my video today folks but i would Really appreciate some of your All-important feedback Which do you think could be the next Country to fall any of my viewers in sri Lanka want to share your experiences i’d Love to know down below And while you’re down there you can also

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