Sunday, 10 July 2022

Sri Lanka’s economic crisis: How one family turned this ‘hidden jewel’ into a basket case




The President went missing, his whereabouts unknown, as protestors stormed the whitewashed colonial-era mansion that serves as his residence. The Prime Minister’s private home, meanwhile, was set on fire. News that both would leave their posts triggered celebratory fireworks. 
This was the scene in the Sri Lankan capital Colombo Saturday, as months-long protests sparked by a crushing economic collapse reached a violent crescendo.

At the heart of the protests was an unprecedented explosion of public anger, directed towards one family: the Rajapaksas, a clan that has dominated Sri Lankan public life for years, and is at the heart of the story of how this small and once vibrant South Asian island nation descended into a raging economic firestorm.

The situation in the runup to Saturday’s events was already dire: in the weeks prior, schools were shut, offices were closed and students were thronging the streets, calling for the ouster of the president. At gas stations around the country, forlorn motorists waited in miles-long queues as fuel stocks dwindled. In many cases, they waited in vain: Even if you could pay, the pumps were dry. And at local markets and grocery stores, you had to pay more and more: Food inflation had soared to more than 57 percent in May. The cost of nonfood essentials? Up more than 30 percent.

This wasn’t some war zone or long-standing economic basket case, but a nation known to travelers as “Asia’s hidden jewel,” a small but strategically important country congratulated for a postwar “economic renaissance” and hailed by the World Bank as a “development success story.”

What happened on Saturday showed in the starkest of ways just how the story had changed, as Sri Lanka’s 22-million strong population faced food and fuel shortages.

The country’s “renaissance” had followed the end of a brutal, decadeslong civil war, and it was heralded as an example for other conflict-ridden nations. Today, groaning under a staggering $51 billion pile of foreign debt that it can no longer service, Sri Lanka is deep in the red, locked in desperate talks for a bailout with the International Monetary Fund.

Ranil Wickremesinghe, who said this weekend that he would resign as Prime Minister as protestors stormed his home, had summed up the situation in an address to lawmakers last month: “Our economy has completely collapsed.”

What happened to Asia’s “hidden jewel” and to that “economic renaissance”? The answer involves the Rajapaksa family, a spate of bad decisions and the tide of inflation washing over much of the world.
A family affair

Wickremesinghe had only come into the job in May, taking power because of waves of anger directed against the Rajapaksas.

Mahinda Rajapaksa, the patriarch, was the prime minister, and president before that; during his time as president, he appointed one brother as defense minister — that brother, Gotabaya, later became president, and as of Saturday night in Sri Lanka he was still missing.

Over the years, other Rajapaksa brothers, cousins and assorted relatives have populated various parts of the Sri Lankan political hierarchy—from the ministry for economic development to the irrigation department to senior positions in Parliament and other public institutions. Indeed, the extent to which the family tree matched the map of power in Sri Lanka was almost unprecedented in modern times.

“You had a ruthless and politically skillful family in a government system that gave them immense powers, which they misused,” Alan Keenan, a longtime watcher of Sri Lanka at the International Crisis Group, told Grid.

Mahinda Rajapaksa became president in 2005 and succeeded soon after in crushing the long-running rebellion by separatists from the country’s Tamil minority community. Both the Tamils and the majority Sinhalese forces were accused of war crimes during the conflict. In the aftermath of the horrors, Rajapaksa and his family entrenched themselves in every area of government.

For a time, Sri Lanka prospered — at least on the surface; annual growth rose to around 9 percent in 2012. But as the family consolidated power, criticism grew within and outside Sri Lanka of the family fiefdom that the Rajapaksas were creating, and the corruption and mismanagement that came with it.

“Over time, what’s happened is that the Rajapaksas have made themselves the epitome of all the defects of governance that we have in the country, and they have exacerbated it by their corruption and their profligacy,” said Paikiasothy Saravanamuttu, one of Sri Lanka’s leading political commentators and the executive director of the Colombo-based Center for Policy Alternatives. “They have mismanaged government.”

Mahinda used his political clout to concentrate authority in the office of the president, pushing through constitutional amendments that gave him direct control of key government institutions. With the hierarchy populated by allies and family members, he faced almost no real checks on his power. Those who tried to stand up to him faced the wrath of the state: In a report in 2013, Amnesty International saidthat his regime “criminalized freedom of expression, and equated dissent with treason” in a bid to tighten its hold on the country. “Dissent,” the rights group said, “is a dangerous undertaking in Sri Lanka.”

At the same time, Rajapaksa and his brothers borrowed billions from international investors and big regional players to boost growth — most eye-catchingly from China, which funded a slate of infrastructure projects. The brothers borrowed with minimal oversight, pursuing what analysts at the London-based Chatham House think tank in 2020 called “a corrupt and unsustainable developmental programme.”

Leaked U.S. diplomatic cables from the early 2000s, when Rajapaksa embarked on his debt-fueled infrastructure building spree, also raised concerns about the motives of the Rajapaksa administration: “There is no strategic approach to developing the region and no coordination between the agencies responsible for the different projects. There also seems to be a lack of understanding, even within the business community, that a certain level of demand and investor interest is necessary for some of these projects to be successful.”

-Grid

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