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Sri Lanka, the island state of South Asia, faces not only a default on its foreign debt to its international creditors, but also an economic crisis that has been deepened by the Covid-19 pandemic. The lack of foreign exchange income from tourism and the mismanagement of the government of the Rajapaksa brothers have caused widespread social discontent.
Following the protests in Sri Lanka against the government of President Gotabaya Rajapaksa, and his older brother, Prime Minister Mahinda Rajapaksa, the latter’s office said in a statement that it will hold talks with the protesters at the site of the protests to hear the reasons. of your discontent.
“If the protesters are willing to discuss his proposals to solve the problems currently facing the nation, the prime minister is willing to invite their representatives for talks,” the office said.
Thousands of people, who are crowding the streets and who have made a camp in Colombo, the capital, are calling for the resignation of the ruling leadership for managing the island nation’s worst economic crisis since its independence in 1948. The shortage of foreign exchange paralyzes fuel and medicine imports and causes electricity cuts for several hours a day.
Some of the protesters at the camp, which has been growing in recent days with food stalls and medical facilities, said they would only leave if the Rajapaksa were removed from power.
One of the attendees, lawyer Janaka Edirisinghe, stressed that “now all these protesters are protesting against the dictatorship. They say: ‘This is a democratic country. We need democracy, we need rights.’ They are all fighting for human rights.”
“There are already people who are suffering… We are all here because economic problems are affecting us,” said Vasi Samudra Devi, one of the protesters, who stressed that “it has been depressing to be so scared about the future and where it is going.” .
The shortage has fueled the anger of the population, which in some cases has acted violently: at least eight people have died since March 20 while waiting in long lines for fuel.
The crowds stormed the homes of government leaders, but were repelled by security forces using tear gas and rubber bullets.
Hundreds of others camped outside President Gotabaya Rajapaksa’s waterfront office.
The opposition made up of the main alliance, Samagi Jana Balawegaya, said it would give the president and prime minister a week to resign before presenting a no-confidence motion in parliament, even though the government has a majority in the legislature.
The economic crisis reverberates in the streets
The growing economic crisis began to be felt in the country after the pandemic that caused the lack of foreign currency income from tourism and remittances. In addition, the government imposed a broad ban on imports to preserve foreign exchange so that it could be used to pay off debts.
This Tuesday, April 12, the head of the Central Bank, Nandalal Weerasinghe, said that he was going to suspend foreign debt payments and divert the remaining foreign exchange reserves to the importation of basic necessities, adding that “this is a Non-payment negotiated preventively. We have announced it to the creditors”.
Economists say economic problems have been compounded by government mismanagement, years of accumulated debt and ill-advised tax cuts.
One of the largest creditors of the island nation of 22 million people is China, which is Sri Lanka’s main bilateral lender and holds around 10% of the island’s foreign debt, followed by Japan and India.
Negotiations with the International Monetary Fund
Sri Lanka is due to start negotiations with the International Monetary Fund (IMF) for a loan program next week. International credit rating agencies such as S&P Global Ratings downgraded Sri Lanka last year, making it impossible for the country to access new loans.
As if that were not enough, this Wednesday Sri Lanka’s foreign currency rating was downgraded again to “CC” from “CCC”. According to S&P, “Sri Lanka’s debt restructuring process is likely to be complicated and could take months to complete” and that “the negative outlook on the ratings reflects the high risk to commercial debt repayment in the context of Sri Lanka’s economic, external and fiscal pressures”.
The World Bank revised growth estimates for Sri Lanka to 2.4% from 2.1% previously, but warned that the economic outlook remains uncertain.
The non-payment of the external debt for 51,000 million dollars announced this Tuesday includes international sovereign bonds, among which is one worth 1,000 million dollars that expired on July 25.
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