On Monday, Ranil Wickremesinghe, the newly designated Prime Minister of Sri Lanka, announced that his goal is to save the country from the present economic crisis and that the next two months will be the most difficult of all. After becoming Prime Minister of Sri Lanka last week, the 73-year-old United National Party (UNP) leader delivered his first speech to the country.
PM Wickremesinghe shared excerpts of his address on Twitter in a series of tweets, stating that foreign reserves were at USD 7.5 billion in November 2019 but now challenging for the Treasury to locate USD 1 million. He went on to say that Sri Lanka only had enough petrol for one day.
5. Fuel Stocks:
— Ranil Wickremesinghe (@RW_UNP) May 16, 2022
• Solution: We managed to bring in a diesel shipment yesterday. Two more diesel shipments under the Indian credit line due on 18/5 and 1/6. Two petrol shipments due on 18/5 and 29/5. We are working to obtain dollars in the open market to pay for these shipments
However, PM disclosed in a subsequent tweet that he managed to bring in a diesel shipment yesterday. Two more diesel shipments under the Indian credit line are due on 18/5/22 and 1/6/22. Two petrol shipments are due on 18/5/22 and 29/5/22. He also stated that the officials are working to obtain dollars in the open market to pay for these shipments.
In regards to energy security, the PM noted that because a quarter of electricity is generated by oil, power outages might climb to 15 hours per day. As a solution, he added that three ships carrying crude oil and furnace oil have been moored within the SL maritime zone for more than 40 days and the treasury has secured funds to prevent the energy crisis.
7. Electricity:
— Ranil Wickremesinghe (@RW_UNP) May 16, 2022
• Solution: For over 40 days 3 ships with crude oil and furnace oil have been anchored within the maritime zone of SL. We have already obtained money to avert this crisis. #EconomicCrisisLK
Sri Lanka is experiencing its worst economic crisis ever, with inflation hitting a record high of 17.5% in February 2022. The island nation’s citizens are facing severe food and cooking gas scarcity.
The island nation’s problem exemplifies how freebie politics undermines a state in the long run. It should be taken as an admonition for the leaders and political parties whose influence is built on promises of free commodities, whether social or physical.
The main cause of the current economic crisis in Sri Lanka, according to policy analyst K Don Vimanga, was trade liberalisation in 1977. He said that Sri Lanka has been affected by a number of reasons, including huge budget deficits, tax cuts, and macroeconomic insecurity. The present crisis, according to analysts, is the outcome of policy mistakes committed by the Rajapaksa rule between 2005 and 2015.
During that ten-year period, Sri Lanka accumulated significant debt with the intention of transforming the country like Singapore. The government lavished money on large-scale infrastructural projects. However, most of them, including Hambantota Port and the Ceylon Electricity Company, failed to attract private investment and were forced to halt.
In order to bring relief to the public ahead of parliamentary elections in 2020, the government proposed tax cuts in 2019, which lowered the number of registered Sri Lankan taxpayers by over 35%. Following the move, revenues fell to an all-time low of 9 per cent of the GDP.
In the midst of Sri Lanka’s economic turmoil, India has offered assistance to the island nation. India has provided a credit line of $1.5 billion for the purchase of 40,000 tonnes of diesel. Additionally, Sri Lanka requested an extra $1 billion credit line for necessary imports. You can read in detail about the Sri Lanka crisis here.
