Sri Lanka’s Economic Crisis: Situational Assessment

Sri Lanka’s immense economic crisis has evolved into a full-blown political crisis. Following an economic crisis that left most in the country unable to afford food, healthcare, and fuel, Sri Lanka’s President and Prime Minister agreed to resign. Sri Lanka’s Economy crisis, caused by government mismanagement, vast debt, and immense losses in foreign revenue, led to mass protests. Such protests culminated in the storming of several government offices and homes of government officials.

Protesters set fire to the Prime Minister’s residence and invaded the home of the President. Over half of Sri Lanka’s cabinet has resigned and the Prime Minister declared a regional curfew and a state of emergency in the country’s western province. Additionally, the President fled the country as the Prime Minister ordered the Sri Lankan military to restore order. Sri Lanka, once an exemplar of stability in South Asia, is now facing an uncertain future.

Key Judgement 1: It is likely that opposition parties in Sri Lanka will band together to form an all-party government in the next 6 months.

  • If an all-party government forms, it will likely to be headed by Mahinda Yapa Abeywardena, Speaker of the Parliament. He will then appoint a new Prime Minister and an interim government. (source)

  • It is imperative that remaining government leaders create a solid transition plan to revive Sri Lanka. Without immediate plans, the public is unlikely to legitimize a new government, which could further the country’s instability. (source)

Key Judgement 2: It is highly likely that Sri Lanka will face a hunger crisis in the next six months.  

  • Sri Lanka has historically not had many issues dealing with hunger. However, the UN World Food Program recently reported that 9 in 10 families have had to skip meals to compensate for increased food prices. (source)

  • Farmers across Sri Lanka are abandoning their crops and livestock. Consequently, rice production has decreased by 50% and seed and fertilizer shortages are predicted to decrease crop yields by 60% this year. (source)

  • Save the Children reports that 85% of all households have lost income since the onset of the crisis. 3 million are currently receiving emergency humanitarian aid. (source)

Key Judgement 3: It is highly likely that the international community will not allow Sri Lanka’s economy collapse in the next 6 months.  

  • Sri Lanka is positioned in one of the world’s busiest shipping lanes and is of great economic, strategic, and geopolitical significance to many major actors. Therefore, it is unlikely that the international community will allow the country to fully collapse. (source)

  • Due to political corruption in Sri Lanka, any rescue assistance from organizations like the International Monetary Fund or World Bank will likely come conditionally.

  • The International Monetary Fund is in talks 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 the IMF intervenes. (source)

Intelligence Cut-Off Date: July 23, 2022

Taylor Huson
Taylor Huson
Taylor is a graduate student obtaining a Master’s degree in Human Rights and Politics at the London School of Economics. She previously graduated with a Master’s degree in International Security from George Mason University and is interested in the intersection of military technology, global security, and human rights.

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