This is unheard of since 1948, the date of Sri Lanka’s independence. The former Ceylon, off the coast of India, is going through its worst economic crisis: the Covid-19 and the stoppage of tourism have brought its economy to its knees and reduced the entry of foreign currencies, while the Asian country needs it to repay its large debts and import basic necessities. Today, the country suffers first of all from the increase in the world price of oil caused by the conflict between Russia and Ukraine.
Thus, the main problem of this island in the Indian Ocean is currently the shortage of gasoline: the world price of oil has doubled in the space of four months. The heavily indebted state cannot buy enough fuel. This leads to huge queues in front of gas stations across the country: four people have already died of exhaustion or during clashes in these queues. And the army had to be deployed to try to maintain calm.
Sri Lanka orders troops to petrol stations as sporadic protests erupt among the thousands of motorists queuing up daily for scarce fuel.
The South Asian island nation is grappling with its worst economic meltdown since independence in 1948https://t.co/ybbNrRQFjJ pic.twitter.com/Zd3BXweWqP
— AFP News Agency (@AFP) March 22, 2022
But beyond that, this gasoline shortage creates much larger problems for the population. Because the rupee Sri Lankan plummeted against the dollar, and everything imported becomes much more expensive. On the island, the price of oil at the pump has increased by around 50% in two weeks, leading to high inflation. Thus, in February, food prices increased by 25.5%, the highest rate in Asia. Finally, as a third of the electricity is produced from oil, this shortage causes long power cuts.
“The hardest thing for me are the power cuts, which last between five and seven hours a day“, explains Kris Thomas, 28, who lives in Colombo. He believes that he faces the worst restrictions of his life: “It is also very difficult to find gas canisters for cooking. And on the black market, the carboy is sold for more than twice the normal price. There is also a shortage of dairy products. And the price of bread has doubled in a week.“
This was tense situation erupted in a queue for domestic gas cylinders in the Rathgama area. How long will it take for people to lose their patience?#lka #SriLanka #SriLankaEconomy #EconomicCrisisLK #පන්නමු pic.twitter.com/yjrrtcPJfk
— Prasad Welikumbura (@Welikumbura) March 22, 2022
In the short term, Sri Lanka needs foreign exchange reserves to keep its head above water. These have been divided by three in three years, to fall to two billion dollars. This is a direct effect of the tourism crisis, which constituted 10% of national GDP before Covid-19. China has therefore just provided a new loan of 2.5 billion dollars, which will be used to repay… another Chinese loan, and to buy equipment, also from China.
India has also put its hand in its pocket and lent, in one month, 1.5 billion dollars to buy gasoline and essential products. Finally, Colombo has agreed to work with the International Monetary Fund (IMF) to secure substantial aid against structural reforms to its economy.