Update (1535ET): Bloomberg reports that Sri Lanka’s cabinet has submitted its resignation, a ruling party member said, amid rising public anger about the government’s economic policies that have led to soaring living costs and a foreign exchange crisis.
“We gave resignations to the Prime Minister saying we are willing to leave at any time,” Education Minister Dinesh Gunawardena told reporters in Colombo late Sunday.
“After discussing with the President the steps to be taken will be decided.”
* * *
As we detailed earlier, the tiny island nation of Sri Lanka is experiencing worsening shortages of food, fuel, and medicine amid a foreign exchange crisis. A 36-hour curfew went into effect this weekend as mass anti-government protests over soaring living costs are underway.
Bloomberg reports that President Gotabaya Rajapaksa imposed a state of emergency on Friday after soaring inflation and widespread rolling blackouts for up to 13 hours a day resulted in protests in the capital and at the president's private home. The emergency order gives authorities sweeping powers to detain and quell protests to restore public order.
People of Panadura thanking the Panadura police for the support in today's protest! Gotas curfew turned out to be just like Gota. INEFFECTIVE! Power to the People! #GoHomeGota #GoHomeGota2022 #GoHomeRajapaksas #wakeupsrilanka #SriLanka #SriLankaEconomicCrisis pic.twitter.com/HdzxDG2sCe— Siraj Noorani (@sirajnoorani) April 3, 2022
Days ago, the Washington, D.C.-based International Monetary Fund (IMF) swooped in and initiated talks with Sri Lankan authorities on a rescue loan. Rajapaksa will fly to Washington for additional discussions with IMF officials.
A confluence of factors drained the South Asian island nation's foreign exchange reserves by more than 70% since the virus pandemic began, including the collapse in tourism and poorly timed tax cuts.
Bloomberg explains more about the socio-economic crisis unfolding on the island nation of 22 million people.
The island nation is undergoing a severe shortage of food and fuel as it runs out of dollars to pay for imports. Inflation has accelerated to almost 19%, the highest in Asia and has played a major part in people taking to the streets to call for Rajapaksa and his family to resign from government.
Rajapaksa's elder brother Mahinda serves as prime minister and Basil, the youngest, holds the finance portfolio, while the eldest Chamal controls the agriculture ministry and nephew Namal is the sports minister. In a possible sign of friction within the clan, Namal openly criticized the latest curbs involving social media.
The Rajapaksa family still enjoys two-thirds majority support in parliament. National elections will be held in 2023 at the earliest.
Rajapaksa's administration in recent weeks has devalued the rupee, raised interest rates, placed curbs on non-essential imports, and reduced stock-trading hours to preserve electricity and foreign currency. He has also dropped resistance to seeking a bailout from the International Monetary Fund and is simultaneously in talks with nations including India and China for bilateral aid. -Bloomberg
Sri Lanka's economic troubles are metastasizing into social unrest as households crushed by inflation can't afford essential items like food and energy. We've explained before (read: here & here) that some weak emerging market economies are set for 'Arab-Spring 2.0'-style unrest.