Why is Sri Lanka facing food, fuel & electricity shortage? Curfew in Colombo lifted

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Why is Sri Lanka facing food, fuel & electricity shortage? Curfew in Colombo lifted

Sri Lankan Crisis: The curfew imposed on the Sri Lankan capital city Colombo was lifted on April 1, 2022. The curfew was imposed after violent anti-government protests broke out in the city demanding the resignation of Sri Lankan President Gotabaya Rajapaksa over his government’s handling of the country’s crippling economic crisis. Dozens of people were arrested and injured in the clashes with the police near the residence of the Sri Lankan President.
 
Over hundreds of protesters had gathered outside the Sri Lankan President’s residence late on March 31st and the police had tried to disperse the crowd using water cannons and tear gas. As per the spokesperson of the police, around 53 people were arrested and they will be presented before court. The protestors allegedly torched several police and army vehicles.

Tourism minister Prasanna Ranatunge said, “Our stance is that people have the right to protest but it should be constructive. What happened yesterday was the opposite.” He said that the main issue Sri Lanka is facing is a forex shortage and protests of this nature will hurt tourism and have economic consequences.

What is Sri Lankan Economic Crisis?

    • Sri Lankans faced up to almost 10-hour of power cuts on March 30th and there were warnings of longer blackouts on March 31st. Sri Lanka also ran out of diesel on March 31st, crippling the country’s transportation system.
    • The Sri Lanka electricity regulator has urged more than a million government employees to work from home to save fuel, as record-long power blackouts continue.
    • Diesel, which is the main fuel of buses and commercial vehicles, was unavailable across the nation on March 31st. 
    • While petrol was available but in short supply, forcing people to abandon their cars in long queues. The owners of private buses said that they are already out of fuel. The private buses account for two-thirds of the country’s fleet.
    • The Sri Lankan Transport Minister Dilum Amunugama said that they are siphoning off fuel from buses that are in the garage for repairs and using that diesel to operate serviceable vehicles.
    • The electricity regulator said that they would be forced to enforce 13-hour power cuts from March 31st, the longest power cuts ever, as they do not have diesel for generators. The hydro reservoirs, which meet a third of the total electricity demand, are also dangerously low. 
    • The record-long power cuts have forced the Colombo Stock Exchange to limit its trading by half to two hours. The electricity shortage has impacted the mobile phone base stations, affecting the quality of calls.

What is the reason for Sri Lanka’s economic crisis?

Sri Lanka has been unable to pay for fuel shipments because of a foreign exchange shortage. It has sought assistance from the International Monetary Fund (IMF). The Sri Lankan government has also asked for more loans from India and China. 

The Chairman of the Public Utilities Commission of Sri Lanka, Janaka Ratnayake said that they have made a request to the government to allow the public sector, which is about 1.3 million employees, to work from home for the next two days so that they can manage the fuel and power shortages better.

The acute shortage of foreign currency has left the nation unable to pay for even the most essential imports. Many experts blame the Sri Lankan government for mismanagement including tax cuts and years of budget deficits.

Impact of Sri Lankan Economic Crisis

      • Several state-run hospitals stopped surgeries as they are out of essential life-saving medicines. They have also stopped diagnostic tests which require imported chemicals that are in short supply.
      • The citizens are also running short of cooking gas supply and cylinders. 
      • There is a shortage of milk powder and even easily accessible medicines like paracetamol.
      • The shortages have also spiked the worst inflation in the country with retail inflation hitting 18.7 percent and food inflation reaching 30.2 percent. 
      • The prices of basic items have almost doubled and tripled. 
      • The officials have been instructed to turn off street lights to help conserve power. 

What will happen now?

The International Monetary Fund (IMF) has said that it will initiate discussions with Sri Lankan authorities for a possible loan program. The discussions will follow Rajapaksa’s visit to the US for talks with IMF officials.

Background

Sri Lanka had imposed a broad import ban in March 2020 to save foreign currency needed to service its $51 billion in foreign debt. This has led to widespread shortages of essential goods and sharp price rises.



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