Sri Lanka is experiencing its most immense economic crisis since the South Asian nation gained independence from the British Empire in 1948. In recent months, most Sri Lankans have been unable to afford basic necessities like food, medications, and fuel, due to shortages and rising prices. This economic crisis is caused by the government’s mismanagement of funds, a loss of foreign revenue, and immense debt. The COVID-19 pandemic left the country in a precarious state, as Sri Lanka lost essential revenue from its lucrative tourism industry. Violent protests have erupted throughout the country, as many blame President Gotabaya Rajapaksa for economic mismanagement, corruption, and embezzlement. In response, an interim government was implemented, and the Prime Minister, brother of the President, was replaced. Despite this attempt to appease protesters, protests in Sri Lanka continue to be deadly, and the country remains on the brink of bankruptcy.
Key Judgement 1: The ongoing economic crisis will likely result in a humanitarian crisis in the next 6 months.
- Sri Lanka has vast foreign debt and only approximately $50 million in usable foreign reserve funds. Due to this, its healthcare industry is been unable to import life-saving medications, anaesthetic drugs, and other medical supplies.
- Many hospitals in the country report only having a few weeks’ supply left of many essential medications. Many hospitals also report losing electricity due to the crisis and have suspended surgeries and laboratory testing. (source)
- Sri Lanka is facing a severe threat of famine. Reports estimate that Sri Lankans are paying three times the normal amount for basics like rice, lentils, and sugar. People claim to wait for hours in queues for groceries. There is also a shortage of cooking fuel. (source)
Key Judgement 2: It is highly likely that protests will turn more violent and deadly in the coming 6 months.
- The government recently deployed thousands of military troops and ordered them to open fire on protestors suspected of violence or looting. A nationwide curfew has been instated. (source)
- Eight protesters have died, one from a police shooting and several hundred are in critical condition in Sri Lanka’s resource-limited hospitals. Protesters have also looted local businesses and museums and have burned down the homes of 38 government officials. (source) (source) (source)
- Protesters have said they will continue to protest with increasing violence until the former Prime Minister is arrested and the current President resigns.
Key Judgement 3: It is likely that the interim government will be unable to create substantial change over the next 6 months.
- President Rajapaksa appointed a new Prime Minister, Ranil Wickremesinghe, who previously served as Prime Minister of Sri Lanka five times. However, he has never completed a term as Prime Minister. Despite being a member of the opposition party, he has close ties to Rajapaksa.
- Prime Minister Wickremesinghe is struggling to create a unity government, as opposition parties want to remove the President from office for his political and economic mismanagement. (source)
- The International Monetary Fund is negotiating with Sri Lanka to secure financial assistance. However, Sri Lanka will first need to restructure its huge external debt. It is likely this will take approximately six months before it is implemented. (source)
- As of May 18, Sri Lanka is set to default on almost $13 billion of overseas bonds. This will be the country’s first sovereign debt default since gaining independence from the British Empire. (source)
- Sri Lanka is in talks with the United States and the United Kingdom regarding assistance. The country has already received US$600 million from the World Bank and several shipments of diesel and basic supplies from India. (source) (source)
Intelligence Cut-Off Date: May 18, 2022