Crisis in Sri Lanka: state of emergency imposed by government
The inability for the Sri Lanka government handle their acute shortage in foreign currency is spiraling out of control, as the government desperately imposed a state of emergency to deal with the protests on the streets.
According to AFP (https://news.yahoo.com/sri-lanka-runs-diesel-faces-071054451.html), diesel was no longer on sale on 31 March 2022 across Sri Lanka – the main fuel for buses and commercial vehicles.
State electricity monopoly enforced a 13 hour power cut because they have no diesel for generators. Colombo Stock Exchange limit trading to two hours, while business ask non-essential staffs to stay at home.
To save electricity, the country even turned off street lights.
These shortages and disruption sparked outrage across the country and protests exploded in several towns.
Several state run hospitals have stopped surgeries due to lack of essential life-saving medicines, while most diagnotics tests are stopped due to chemical supply shortage.
These widespread escalation of shortages has resulted is massive price rises.
Highlighting the severe shortage of foreign currency, a vessel carrying 5,500 metric tonnes of cooking gas had to leave Sri Lankan waters after Laugfs Gas (LGGL.CM), the company that ordered it, could not procure $4.9 million from local banks to pay for it.
https://www.reuters.com/world/asia-pacific/tight-security-sri-lankas-capital-shops-open-after-state-emergency-order-2022-04-02/
The government is currently trying to seek a bailout from IMF (International Monetary Fund) and loans from India & China.
India had answered the call for aid, providing a 1 billion credit line on 17 March 2022 (https://www.reuters.com/world/asia-pacific/india-starts-supplying-rice-sri-lanka-first-major-food-aid-2022-04-02/) that allows a prompt shipment of 40,000 ton of rice to Sri Lanka, as part of the planned 300,000 ton shipment of rice.
Sri Lanka’s foreign exchange reserves fallen 70% in the past 2 years according the same reuters report, to about 2.31 billion USD at the time of the article.
In our opinion, if Sri Lanka cannot resolve the current crisis – they might become the first country in a long time to become a failed state despite having a working government and not involved in a civil war or major war.