Opinion
Dollar Crisis: What aggravated it
by Eng. D. Godage
Total foreign currency reserves of the country were around seven billion dollars at the beginning of 2021 but it decreased to around 1.2 billion dollars towards the year end, even though the Central Bank announced that there was a reserve of three billion dollars. The net foreign assets of the total banking system are said to be a US$ 4.1 billion deficit by 2021 end. Everybody knows the suffering and difficulties the countrymen undergo as a result of the depletion of foreign currency or dollar reserves. Without elaborating on those effects, it is the intention of the writer to examine how foreign reserves depleted so fast.
Politicians, officials, public speakers very often tend to blame every government since independence over the past 70 years for ruining this country, but with regard to foreign debt, it is not applicable. Moreover, the effects of the COVID-19 pandemic were felt globally but other countries in this region did not suffer as much and face such crises like the ones faced by Sri Lanka, so it is no excuse. It is not essential to elaborate on this fact as it is common knowledge. Consequently, the writer makes an attempt to understand how and when it happened. The focus of this discussion is on infrastructure development, and not other debt instruments.
Debt burden since independence
The Oya project implemented around 1948 using local funds comes to mind. Moreover, from 1950 the major port development scheme of Colombo Harbour created the Colombo Port, one of the most modern ports at the time, by 1956 under the leadership of the Minister of Transport and Works, Sir John Kotelawala in the Dudley Senanayake Cabinet, utilising local funds amounting to 110 million rupees. While work was in progress, the ship ‘Gothic’, carrying Queen Elizabeth II, berthed alongside the newly constructed Customs Quay to christen it the Queen Elizabeth Quay (QEQ). Incidentally, the QEQ was buried in the privately developed SAGT or South Asia Gateway Terminals around year 2000.
The Mahaweli Development Project, a massive irrigation cum hydroelectric scheme originally planned for 30 years but telescoped into about six years, was undertaken by the J.R. Jayewardene government using concessionary loans as well as grants. Funds were provided based on a thorough feasibility study, with eminent engineer late Dr. A.N.S Kulasinghe and his team of engineers working as consultants. Resultant benefits are well known and they did not lead to any debt crisis in the country.
Road and railway infrastructure development has been carried out with locally raised funds. After the 2004 tsunami disaster, the Railway Department staff rehabilitated the destroyed line to recommence operations with the least possible delay. It is said that northern rail line improvements carried out later on loans under Uthuru Wasanthaya had spent two to three times the cost.
Since 1980 the country has seen another major development programme in the port sector. Studies had been conducted at a time of increasing demand for container traffic, confirming the urgent need to expand port facilities. The first phase of expansion, requiring US$ 32 million, was funded in the form of a Yen currency loan. The project progressed systematically aided by further loans, through a transparent bidding process. As a result, the Colombo Port was elevated from the global rank of 127 in 1981 to 21st in 1997. These loans were granted only after proper feasibility studies were carried out and confirmation of loan repayment capability, as affirmed by the lending Japanese Agency. Extensive borrowing for project infrastructure became the norm only after about 2000 and not since independence.
Newer debt accumulation
A Sunday English newspaper on March 9, 2014 and May 1, 2016 reported, with details from the External Resources Department, on 28 projects funded predominantly by China Exim Bank loans amounting to US$ 7,671 million, with five-year grace and 10-year repayment periods; their interest rates are not indicated but is supposed to be over six percent. All these projects are said to have been initiated through unsolicited tenders. The same newspaper published a report under the caption, “Normal tender procedure not possible for mega projects: PBJ”. This is a questionable statement. Further examination of the above list shows seven projects, all in Hambantota, totalling US$ 5,054 million, for airport, port, highway extension, railway extension and local road network. None of them seem capable of generating revenue to repay the massive loans even though they have been in operation for around 10 years by now. These loans alone require about US$1 billion per year as repayment, burdening the country, and using up its dollar reserves. During the previous regime the Hambantota Port was given out on a 99-year lease.
Did the Treasury officials who handled these borrowings not see the danger of the debt burden or debt trap and the country’s inability to repay them without adequate future revenue? One can cite the shifting global financial structure and unforeseen circumstances as the reason. But they should have been taken into consideration in any plan. High costs due to unsolicited proposals without a competitive bidding process are also an issue. As for costs, the Treasury Secretary has said that it is the engineers who determine costs. This is not an acceptable excuse.
The Colombo Port South Harbour was found to be an urgent project, and proved viable after an extensive feasibility study by 2001. After producing detailed designs, cost estimates and all implementation requisites, it was not possible to proceed due to lack of funds. The Hambantota Port project was also given high priority by the same government though two feasibility studies failed to show the viability of the project. For the Colombo Port project, the Treasury Secretary advocated commercial borrowing claiming that the lending agency conditions were unacceptable.
In fact, only one lending agency came forward to offer approximately one third of the fund requirement. The Ports Authority managed to obtain very concessionary loan of US$ 300 million in 2006, to proceed with the project, albeit after a two-year delay. The new harbour was completed successfully within the stipulated time and cost while adhering to a transparent tender process. It is worthwhile to note that the lowest cost, approximately US$ 320 million, was quoted by the Korean contractor who successfully completed it, while the next bid was around US$ 570 million by a Chinese contractor. This project seems to be generating more revenue than budgeted.
In fact, the biggest container ship in the world ‘Ever Ace’, with a carrying capacity of 24,000 TEU, berthed in the Colombo South Harbour in October 2021 as it is the only port in the region that could accommodate a ship of that scale, bringing great honour and promoting the Colombo Port.
Most Chinese funded projects that commenced during the past two decades seem now complete and in operation, spread among power and energy, transportation, airport and aviation, ports, irrigation and water sectors. Debt distribution is US$ 1,553 million in power and energy, US$ 3.99 billion in transportation, US$ 232 million in airport and aviation, US$ 1,336 million in ports and US$ 101 million in irrigation. This includes projects indicated by the aforementioned 2016 news item, and subsequent major projects like the Central Highway are not included.
Expensive ventures like the Norochcholai coal power plant costing US$ 1,346 million have helped to meet the country’s energy demands and there has to be a post project evaluation to ascertain its financial gains and loan repayment capacity. Highway projects undertaken on expensive loans do not seem to generate enough revenue to meet dollar loan repayments. Although some benefits accrue, the post project economic and financial evaluations are not satisfactory. The highest revenue on a peak day on the Southern Highway has been 38 million rupees a day. Considering the average annual turnover minus the operation and maintenance costs it could take 100 years to repay loans. Authorities should perform a post project evaluation for the benefit of future planners.
Lessons to learn
This is history but should not be discarded, for the valuable information and data therein demonstrate the actual scenario and resultant repercussions. Decision makers and economic advisors to the government, especially of the Treasury and any other relevant officials could review them.
The debt burden has aggravated the dollar crisis during the past two decades. The COVID-19 pandemic during the past two years is not an excuse as other countries in the region too have faced the same but are performing better. The negative economic growth in 2020 and the considerable dollar debt burden, with the country’s reserves collapsing have not occurred suddenly. Severe import restrictions have made day to day life of the people inconvenient and led to the collapse of some domestic industries.
The worst is yet to come, as warned by the Secretary to the President, delivering a speech in Colombo, as reported by a Sunday English newspaper on 28 Nov. 2021. He was the Treasury Secretary during the past two decades, when China Exim Bank loans were signed to the tune of billions of dollars mostly for white elephant projects, The massive dollar debt seems the root cause of most problems faced today.
Opinion
Sri Lanka’s Food Safety Imperative
From Burden to Solutions:
Every year on 07 June, the world pauses to reflect on a truth that is at once mundane and profound: the food on our plate should not make us sick. This year, the World Health Organization and the Food and Agriculture Organization of the United Nations have chosen a theme that is both a diagnosis and a directive “From burden to solutions – safe food everywhere.”
The framing is deliberate. For too long, conversations about food safety have been dominated by the language of loss counting the sick, tallying the dead, lamenting the economic damage. The 2026 theme demands that we harness that data not as an epitaph, but as a map that guides us toward targeted, evidence-based action.
Globally, foodborne diseases cause illness in at least 600 million people and claim an estimated 420,000 lives every year. These are not abstractions. They are children who did not return to school, breadwinners who could not return to work, and farmers whose produce never reached a market.
For Sri Lanka, the stakes are deeply personal. As a food scientist who has spent over a decade studying, teaching, and working across our food systems from university laboratories and hotel kitchens to dairy processing plants and international sporting events, I have witnessed both the fragility and the resilience of food safety in this country.
The burden is real. Foodborne infections from Campylobacter, Escherichia coli, Vibrio cholerae, and Hepatitis A continue to be recorded by the Epidemiology Unit. Pesticide residues in vegetables, aflatoxin in stored grains, and heavy metal contamination in seafood present chronic, low-visibility risks that rarely make headlines but accumulate silently in our bodies and in our healthcare bills. The unchecked proliferation of informal food establishments has widened the exposure surface significantly.
Sri Lanka’s food safety architecture rests primarily on the Food Act No. 26 of 1980. A legislation conceived in an era that could not have anticipated the complexity of today’s supply chains, the growth of modern retail, or the risks posed by climate-driven changes in microbial ecology. While amendments in 1991 and 2011 have partially modernised the framework, the foundational challenge of fragmented, multi-ministerial oversight remains unresolved. No single authority commands the end-to-end food chain from farm to fork.
The consequences are visible. Sri Lanka has repeatedly seen food export consignments rejected at international borders due to non-compliance with safety standards. A reputational and economic wound that strikes our tea, spices, fish, and fruit sectors. These rejections are not merely trade disputes; they are data points, signalling systemic gaps in Good Agricultural Practices, cold chain infrastructure, and laboratory testing capacity. The 2026 World Food Safety Day theme is therefore a clarion call to Sri Lanka’s policymakers, industry leaders, academics, and consumers alike. We have data. We have science. What we need is the collective will to act.
The solution begins with data.
The WHO’s landmark 2026 release of national-level foodborne disease burden estimates the first of their kind, covering the period 2000–2021 provides an unprecedented opportunity. For the first time, Sri Lanka will have access to country-specific data on the incidence, mortality, and disability-adjusted life years attributable to specific foodborne hazards. This is not merely an academic resource; it is a policy instrument. Ministries of Health, Agriculture, and Industries must treat it as such, using it to identify where risk is highest, which population groups are most vulnerable, and which interventions deliver the greatest return on public health investment.
Having served as a Food Safety Officer/Trainer and Trainer at the FIFA 2022 World Cup in Qatar, I observed first-hand how a structured, data-driven approach to food safety management grounded in HACCP principles and supported by rigorous real-time monitoring can successfully feed tens of thousands of people across dozens of venues without a single outbreak. The lesson for Sri Lanka is not that we must import foreign systems wholesale, but that the underlying principles of evidence, accountability, and prevention translate universally.
Education is the second pillar of transformation.
In my years of teaching food safety to university students, hotel management students, tourism professionals, and food industry workers, the most consistent finding is that unsafe food practices are rarely born of malice. They arise from ignorance of microbial growth temperatures, of cross-contamination pathways, of the invisible consequences of inadequate handwashing. Behaviour change at scale requires education that begins early. We must embed food safety literacy into our school curricula, not as an elective topic in home economics, but as a fundamental life skill taught alongside reading and arithmetic. Food safety must be as instinctive as looking before crossing a road. Industry bears its own responsibility. Food business operators from the multinational processor to the neighbourhood bakery must understand that food safety is not a compliance cost to be minimised. It is a brand asset, an ethical obligation, and ultimately, a business survival strategy. The investment in quality management systems, whether ISO 22000, FSSC 22000, or the foundational GMP and GHP frameworks, pays returns in consumer trust, export market access, and reduced liability. Safe food is not a luxury reserved for export markets or five-star hotels. It is a right that belongs equally to a schoolchild buying a kottu roti from a street cart and a tourist dining in a star hotel. The 2026 theme reminds us that the burden is well-documented. The solutions exist. The only thing left is the resolve to implement them everywhere, for everyone.
PRIORITY ACTIONS FOR SRI LANKA
= Enact a unified Food Safety Authority consolidating fragmented regulatory mandates under a single body
= Establish mandatory HACCP certification for food businesses beyond the large-scale sector
= Invest in regional food testing laboratories with accredited capacity (ISO/IEC 17025)
= Integrate food safety education into the national school curriculum from primary level
= Strengthen cold chain infrastructure, particularly for seafood and fresh produce destined for export
= Adopt the WHO 2026 national burden data to prioritise health spending on highest-risk hazards
= Empower Public Health Inspectors with digital reporting tools and updated training mandates
Opinion
“The path of freedom: Dismantling the imperialist debt trap
I must first thank Gayantha Dehiwatte for inviting me this afternoon to the launch of his book, The Path of Freedom: Dismantling the Imperialist Debt Trap. The title itself suggests that Sri Lanka has yet to achieve genuine independence, particularly in the sphere of economic decision-making. In recent years, most economic decisions of major importance appear to have emanated from Washington. During the initial phase, these decisions reached Colombo in the form of International Monetary Fund- World bank conditionalities. In more recent years, however, many of these policies have been designed locally by the economists and bureaucrats in the Treasury and the Central Bank of Sri Lanka who are trained in western academic institutions. As a result, local and international experts have worked in synergy united by their adherence to what may be called the TINA (There Is No Alternative) doctrine.
According to Dehiwatte, ‘the current economic structure in Sri Lanka is guided by the principles of neo-liberal free-market economics. This economic theory has been steering the course of Sri Lankan economy since 1978’ (page iii). It was consistently claimed that the policy package introduced in 1978 would generate higher rates of growth, lower unemployment, poverty alleviation, reduced dependency and inequality transforming Sri Lanka into the Singapore or South Korea of the Indian ocean region.
In this talk, I would focus on three main points. My first thesis is that Sri Lanka is now facing a simultaneous presence of three crises namely, the structural, conjunctural and contingent crises, as a direct consequence of the neo-liberal economic policies introduced in 1977. Second, the decision to invite the IMF to play a central role in managing the 2022 debt crisis was a serious mistake. Third, although the de-dollarisation is an essential step towards resolving the crisis it is not by itself sufficient to transform the existing global economic architecture.
The performance of the Sri Lankan economy over the last 48 years (1978- 2026) does not support the contention that the adoption of neo-liberal economic policies as outlined in Washington Consensus would pave the way for sustained economic growth and development. Compared to the period from 1950- 77 period, there has been no significant improvement in either the rate of economic growth or in the level of employment. Dehiwatte reports: ‘As of 2024, approximately one-third of Sri Lankan population -around 7 million people – are living below the poverty line, with about 2.3 million children suffering from hunger due to inadequate access of food. That is, exactly half of the children are going hungry. The total number of families in Sri Lanka is about 5.7 million, of which 3.7 million seeking assistance to survive’ (p. 18). data on consumption patterns strongly corroborate these findings. The top 1% of the population accounts for 22% of GDP whereas the bottom 50% accounts for only about 14%. The crisis Sri Lanka has experienced over the last 48 years is an all-embracing structural crisis, the resolution of which requires far-reaching changes to the existing economic structure. Following Istvan Meszaros, four characteristics of the present crisis may be identified:
(1) It is not confined to a particular sector of the economy;
(2) It is global in scope, being closely linked to the process of globalization;
(3) Its temporal scale is continuous rather than limited and cyclical, making it difficult to identify a clear beginning or point;
(4) Its mode of unfolding is gradual and creeping rather than in contrast to sudden and explosive. (Beyond Capital. pp. 680- 81).
The structural crisis is the product of a conjunction of three interrelated developments: the absence of an independent macroeconomic policy framework, the nature of the bourgeoisie, and the nature of the state and its relationship to different social classes. Given the limited time available, I will not attempt a detailed analysis of these three dimensions. Nonetheless, two observations deserve emphasis. First, the average annual growth rate during the last 48 years has not been significantly higher than that achieved during the preceding period of the so-called dirigisme regime. Second, although Sri Lanka experienced two periods of relatively rapid growth (1978- 1982 and 2010- 2915), it failed to sustain the momentum generated during these periods. Consequently, these episodes were ultimately reduced to little more than infra-structure driven bubbles.
Cyclical fluctuations within a prolonged structural crisis are not uncommon in market economies. Sri Lanka is no exception. During the public debate surrounding the 2022 economic crisis, it was frequently argued that the crisis began in 2019 because of misguided economic policies. However, as data demonstrates, the current conjunctural crisis began not in 2019 but in 2016. The recession that started in 2016 culminated in negative growth in 2020. A modest recovery in 2021 was followed by a negative growth both in 2022 and 2023. The economy returned to a limited recovery in 2024, but by 2026 that recovery appears to have lost momentum. If one plots annual growth rates between 2026- 2026 a W-shaped cycle emerges, with its lowest point in 2022. The debt crisis in 2022 should therefore be viewed not as an isolated event, but as the trough of the 2016- 2025 cycle. Of course, the acceleration of the crisis in 2022 was triggered by excessive borrowing in the global capital market through ISDs (International Sovereign Bonds). Prof Prabath Patnaik depicts this specific phenomenon as a contingent crisis: a crisis that appears manageable until a sudden financial crunch exposes underlying vulnerabilities. The IMF’s own projection that annual growth will remain around 3 per cent in 1926 together with its assessment that debt sustainability remains fragile, suggests that Sri Lanka is once again approaching a tipping point.
Confronted with these three interrelated crises, the neoclassical economists, CBSL and Treasury officials and politicians representing bourgeoisie parties argued that seeking IMF support was the only available solution. According to this view, it was imperative to accept a comprehensive IMF program at any cost. The irony is that these same actors have failed to acknowledge that Sri Lanka has been operating under the IMF program for seven out of ten years under consideration. (2017- 2020 and 2022- 2026). A second group adopted a more critical position. While accepting the need for IMF engagement, they argued for greater local input, theoretical as well as practical, into the program and advocated modifications and incorporation of selected elements of the augmented-Washington consensus. Both groups, however justified IMF intervention on the grounds that the IMF is an international institution of which Sri Lanka is a member and that the country therefore has a legitimate right to seek assistance during a foreign exchange crisis.
This argument suffers from three fundamental defects. First, it overlooks that the IMF and the IBRD established in 1945 are very different institutions from those that emerged during the mid-1970s. The original purpose of the IMF and IBRD was to assist war-ravaged countries in Western Europe and Japan facing balance of payment difficulties and reconstruction needs. By the 1970s these tasks had largely been completed rendering the original mandate of the institutions increasingly redundant Following the quadrupling of oil prices and the accumulation of petro-dollars in the US banks, the IMF effectively assigned itself a new role: that of managing the interests international finance capital during the neo-liberalist phase of the capitalist development. Its primary responsibility thus shifted away from member states and towards the preservation and upholding of the interests of the global capital market and its institutions. (For a detailed discussion, see : Unholy Trinity: the IMF, World Bank and WTO by Richard Peet) 2003.
Second, the dominant approach is based on the presupposition that there is no alternative. Consequently. The magnitude of the crisis was exaggerated in order to ensure Sri Lanka’s continued integration into the global financial system and therefore its continued entrapment with a cycle of indebtedness. Third, the argument rests on a fundamental misunderstanding of the IMF’s mode of crisis management. When dealing with a crisis ridden country, the IMF typically intensifies the crisis by imposing deflationary policies designed to restore creditor confidence.
The Sri Lankan experience illustrates this pattern clearly. Although the economy achieved a modest but positive rate of growth in 2021, growth contracted sharply in 2022 and 2023 following the implementation of IMF-backed policies. Once an economy reaches the trough of the cycle, its internal dynamics tend to generate some degree of recovery because aggregate demand rarely falls to zero. Consequently, the stability achieved since 2024 should be understood as a low-level stability -an outcome of economic contraction and adjustment rather than genuine transformation.
Let me turn to my third thesis that Dehiwatte had raised in his proposal for de-dollarization. The book appears to suggest that de-dollarization is imperative if the imperialist debt trap is to be dismantled. In a different historical context, some French economists argued that replacing the franc with a currency based on labour value would provide a solution to balance-of-payments crises. Commenting on this view, Marx observed:
“In order to balance the decrease of domestic production by means of imports on the one side and the increase of industrial undertakings abroad on the other side, what would have been required were not symbols of circulation which facilitate the exchange of equivalents but the equivalents themselves, not money but capital” (Grundrisse, p. 121).
However, the context to which Gayantha Dehiwatte refers is substantially different. In 1944–45, when the advanced capitalist countries debated the design of the post-Second World War international financial architecture, they arrived at a consensus that it should be centred on the U.S. dollar. The principal reason for this decision was the overwhelming dominance and productive superiority of the U.S. economy.
By the early 1970s, however, this superiority had begun to erode. Nevertheless, as Costas Lapavitsas has argued, “dollar dominance persisted and deepened through structural dependence as global trade, finance and reserves remained locked into dollar circuits, sustained by military power and institutional inertia despite the declining share of the United States in the world economy.”
It is in this context that Gayantha Dehiwatte’s argument acquires its significance. For him, de-dollarization does not simply mean replacing the dollar with another international currency. Rather, it entails transforming the structures of power that underpin dollar hegemony and reproducing a global order based on dependence and financial subordination. In this sense, de-dollarization is not merely a monetary reform but part of a broader project of restructuring the international order itself.
Ultimately, the argument points toward the possibility of imagining a new world order founded on the principles of democracy, equality, and ecological sustainability.
The writer is a retired teacher at the University of Peradeniya
Email: sumane_l@yahoo.com
Revieved by Sumanasiri Liyanage
(Text of a recent speech.)
Opinion
Is Sri Lanka on the wrong side of history?
To say that the developing new world order is history in the making may not be an exaggeration, because the economic, military and hegemonic landscape of the world may be undergoing radical realignment in these troubled times. Multipolarity and the emergence of the Global South’s economic and political clout may be the defining features of the new world order. There may be several evidential happenings around the world that give credence to the above observation. For instance, at the 61st Munich Security Conference, held in 2025, multipolarity was accepted as a historical inevitability and a reality. The Munich Security Report 2025, themed “Multi-polarization,” explicitly states that the world already lives in a multipolar order. The Munich Security Council, traditionally dominated by Europe and the US, saw 30 percent of its speakers, this time, representing the Global South, a testament to the world’s multipolar trajectory
The Munich Security Report 2025 highlights that BRICS nations contribute to approximately 40 percent of global trade, as well as crude oil production and exports. Further, according to the International Monetary Fund, the GDP of emerging markets and developing economies accounted for 58.9 percent of the global economy in 2023.
Countries in the Global South are asserting greater independence in global affairs. They have actively promoted greater democracy in international relations through platforms such as BRICS and the Shanghai Cooperation Organisation, injecting vital momentum into the world multi polarisation process.
Another clear indicator of this reality is the way the US failed to impose its will in the affairs of the Middle East. Significantly, it could not achieve its objectives in the war against Iran and, furthermore, its European allies refused to join, saying that it was not their war. The fact that the war, which the US and Israel expected to be a quick “strike and take over,” has ended up in a stalemate, with Iran holding all the cards, according to Prof Jeffrey Sachs, points to the changing balance of power in the world. Obviously, Iran was able to enhance its military capability due to the significant development of the multiple military power blocs.
In this regard it is interesting to see that most of the countries in Asia, Africa and Latin America, which have suffered due to western hegemony and economic exploitation, tariffs and sanctions and dollar weaponisation, are beginning to make moves towards realigning their relationship with world powers. Several African nations, Egypt, Ethiopia, Algeria, Kenya, Tanzania, are actively realigning toward the Global South, shifting away from Western-aligned partnerships to pursue multipolarity, resource sovereignty, and new economic ties with powers like China, Russia, and India.
In Asia, too, the trend is apparent; Malaysia has adopted an explicit Global South policy, focusing on outreach to the Middle East, Africa, and Latin America, as well as deepening ASEAN institutional ties. Indonesia focuses on inclusive multilateralism and critical balancing in global governance, ensuring the developing world’s economic needs are prioritised. Iran, Saudi Arabia, and the United Arab Emirates joined BRICS in 2023, reflecting a strategic shift to diversify their diplomatic and economic alliances away from purely Western orbits. There are several other countries that are emerging as economically independent and diplomatically articulative states, like Nigeria, Turkiye, and Mexico.
What is the position of Sri Lanka in this rapidly changing world order? Are we going to be left behind? Why aren’t there any signs that Sri Lanka is projecting itself as a willing partner of this journey in the South? Why isn’t it attempting to break away from the neo-liberal grip that keeps it in poverty and turn to the South? Are there any tangible economic, political or geopolitically strategic projections, reaching out to the Global South, that Sri Lanka has launched, at present, like so many other countries are doing? Even when opportunities knock on its door, Sri Lanka doesn’t seem to be interested. A case in point is the BRICS meeting in 2024, held in Russia. Though Sri Lanka was invited, none of its state leaders attended the meeting, resulting in the loss of an opportunity to establish vital economic, political and cultural links and bonds with Global South countries.
What is restraining Sri Lanka? Is it its present economic vulnerabilities and dependence on the West? It is the Global North that controls the Sri Lankan economy at present. We are tied to the IMF and controlled by their conditions and the IMF is under the thumb of the West. Further 60 percent of our exports go to the Global North. It seems likely that our export oriented, debt-burdened economy cannot afford to turn towards the Global South because of our utter dependence on the West. We saw that there was no hesitation to slap tariffs on us though we show the least tendency to disobey. One could imagine what could happen if we turn southwards, even a little bit. This is the reason why Sri Lanka would dare not change direction the slightest.
Countries that turn southwards do so to escape from the hegemony, exploitation and coercive power of the West. Isn’t there a way out for Sri Lanka to get out of this vicious global economic system and become economically independent? We were bankrupt in 2022 and people rose up against the system and wanted a change. The present government rode that tide and came to power promising a change. But there was no change and not even an attempt to change. What needed a change was the economy in the main, which would be meaningless unless a break from the fetters of neo-liberalism was the aim. What did not change was exactly that, though there were attempts to change other less vital areas, such as going after the corrupt in the Opposition.
It must be said that the government had an excellent opportunity to correct decades long mistakes. The people were asking for a change which means they were prepared to participate and support the government if it wanted to go for that change. An attempt should have been made to gradually change the export-import-debt based economy and lessen the dependence on the Global North and its economic system. A turn towards the Global South would have facilitated the desired change. The government was left-oriented, or so they said. But it appeared to be helpless to break away from the neo-liberal shackles, leave alone negotiating a better deal with the IMF.
True, we are not strong enough to go for such radical change but we could have made ourselves strong by achieving self-sufficiency, the only way to become economically independent. Such a move, no doubt, would initially result in hardship for the people, but eventually the country would come out of its poverty. Now they are condemned to eternal privation.
The government’s plan, if it wanted to go for the change, they promised, should have been to first launch a comprehensive programme to achieve self-sufficiency in our essential needs like food, cloth, medicine and green energy. The other critical move that Sri Lanka should have made was to join the Global South in its march towards a new world order. Such a strategy would have helped us to achieve a stronger and independent economy.
An important outcome of adopting such a policy would be that our economy would not be vulnerable to external shocks such as tariffs, drop in tourism, turmoil in the Middle East that disrupts fuel supply and migrant-remittances, and external trade vagaries. Further, when we are not dependent on our essentials, nobody would be able to dictate to us or interfere in our internal affairs.
Another important factor in Sri Lanka’s favour is its strategic position in the Indian Ocean and the fact that due to this everybody needs it. India would like to have a firm grip on it, so does the US. China has invested heavily in it due to this reason. However, Sri Lanka, at present, is not strong enough to leverage this geographical strategic situation to its advantage because of its highly dependent and vulnerable status. As a consequence of this strategic situation could be exploited by powerful countries as is now happening.
What Sri Lanka could do in this regard is to develop its airports and harbours as a transit trade hub by leveraging its strategic geographical position in the Indian Ocean to serve as a central stopping point where cargo, vehicles, and raw materials are consolidated, temporarily stored, or re-exported, primarily connecting East Asia, the Middle East, Africa and the Indian subcontinent. This would facilitate trade among the Global South countries and enhance Sri Lanka’s role and image in the new world order. At present Sri Lanka’s true potential in this business has not been realised due to its vulnerabilities, but if it chooses to take the path outlined above it could succeed. For this to happen Global South assistance is vital. There is no choice for Sri Lanka but to grab this moment of history and join the journey towards the new world order before we are left behind.
by N. A. de S. Amaratunga
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