Between the war in Ukraine and the Covid-19 pandemic now swirling in China, the world has had little time to worry about the popular uprising in Sri Lanka. Prime Minister Mahinda Rajapaksa has been forced to step down, but his younger brother, President Gotabaya Rajapaksa, still clings to his post, hiding behind the fiction of a government of national unity, as he swore in Ranil Wickremesinghe as Prime Minister. It remains to be seen whether public anger against the Rajapaksas will subside to allow this transitional arrangement to let the beleaguered nation negotiate a bailout deal with the International Monetary Fund (IMF).
The nation had come to this point due to a combination of bad policies and other factors over which Sri Lanka had little control. Two of these developments overlapped after the newly elected president in 2019 made the decision to cut taxes. The Covid-19 pandemic hit the world in 2020, followed by Russia’s invasion of Ukraine in February this year. An already economically struggling Sri Lanka has been dealt a fatal blow by war that has driven up energy prices overnight, while Covid-19 has spawned lockdowns in China that have disrupted supply chains world. Moreover, the government, as if it did not have enough problems already, reduced the importation of synthetic fertilizers to make the farmers switch to organic farming.
The reason Sri Lanka has been seriously hampered is the persistent structural problems in its economy since its independence in 1948. Easy foreign exchange was earned in the 1950s from its major exports like tea, rubber and walnuts. of coconut. Industrial development was not given priority, which led to an excessive dependence on these few basic products which were always subject to fluctuations in international demand. As a result, Sri Lanka earned less foreign exchange in 1968 than in 1958 as demand for rubber and other commodities fell.
When JR Jayawardene was elected president in 1977, he tried to reform and liberalize the economy. He removed restrictions on international migration as jobs opened up in the Gulf for workers. Thus, workers’ remittances have become a new source of foreign currency. But Sri Lanka has not been able to manage its Tamil problem through national accommodation and consensus. India’s military intervention in 1987, when New Delhi dispatched the Indian Peacekeeping Force, only further complicated the situation. Sri Lanka then slipped into a hyper-nationalist phase and struggled against the LTTE, which led to the rise of the Rajapaksa clan.
Fortunately for Sri Lanka, the Congress-led UPA government took power in New Delhi in 2004, giving Colombo the freedom to eliminate the Tamil Tigers without any Indian interference. The civil war finally ended in 2009, leaving the choice to the ascendant Rajapaksa clan. They could lead the nation back to consensual resolution of minority issues, or resort to jingoist majoritarian politics, mixed with militant Buddhism. They chose the latter.
In the process, the Rajapaksa family also decided to protect their diplomacy by inviting a rising China to step in and balance India’s traditional influence in that nation. China, then seeking to expand its reach in the Indian Ocean, brought in investment and infrastructure projects, many of which were unrelated to their ability to repay the investment. Thus began the accumulation of the debt trap that brought Sri Lanka to a state where it would collapse with one more stroke. Fate, instead, inflicted both on them, with the deadly consequences we see today.
The Covid-19 pandemic has led to a collapse of the entire tourism sector. While tourism accounted for 5.6% of Sri Lanka’s GDP in 2018, it contracted to 0.8% in 2020. Similarly, remittances from expatriate workers accounted for 10% of GDP in 2019, but collapsed in 2021.
It is estimated that they will halve again this year. Simultaneously, the war in Ukraine raised world oil prices, hitting the common man as inflation soared. It was a perfect storm that a family business didn’t have the capacity to handle.
India has a big opportunity to rebuild its grip in its crucial maritime neighborhood when the opposition launched an anti-India chant in the Maldives. In addition to rapidly transferring $2.4 billion to help Sri Lanka avoid default, India is now donating 65,000 metric tons of urea, helping to reverse the sudden jolt to Sri Lanka’s agro-economy. Lanka.
Some lessons are evident from the crisis in Sri Lanka. One is the peril of populist leaders combining nationalism and religion. Even peace-promoting Buddhism has been turned into hate-spitting faith by some monks in Sri Lanka, Myanmar and Thailand. The consequences have been the stifling of democracy and erratic decision-making. This is a lesson for the BJP to reflect on as its Hindutva project moves forward.
Next is the tendency of populist leaders to make brash decisions without debate or analysis. The Indian economy managed to survive the demonetization movement of November 2016, but not without taking a hit. China and India are facing the consequences of top-down decision-making to manage the Covid-19 pandemic. India is still arguing with the World Health Organization over WHO figures on deaths linked to the outbreak. China is caught between lockdowns hitting its economy and fears that ineffective vaccines could allow the spread to spread if China relaxes its “Zero Covid” protocols.
It is doubtful that Sri Lanka can be completely removed from Chinese influence. Imagining him as a “Quad” member will not be practical. But limiting China’s military access to its ports as India builds up its presence in Trincomalee on Sri Lanka’s east coast would be a plus. India must also push for a less majoritarian policy.
But here is the catch. How does a majority BJP teach a smaller neighbor the values of consensus and democracy? The 2019 Easter Sunday bombings had sown Islamic terror in the island nation. Tamil militancy may have been crushed, but at the cost of changing the core values of Sri Lankan politics.
A government of national unity is a good starting point for national rejuvenation. But like Donald Trump in the United States, the Rajapaksa clan cannot give up its quest for power very easily. China would support them materially, in direct proportion to increased Indian influence.
Thus, the race between India and China is not over yet. It just got a whole lot more complicated as the people of Sri Lanka will decide what kind of government they want after the next election, which could come sooner than expected.
Until then, India must remain more nimble and proactive. Diplomacy will be most tested in India’s immediate neighborhood.