Sri Lanka economic crisis: Long queue at pumps, no electricity, more

By Gargi Chaudhry | First Published Mar 23, 2022, 11:04 AM IST

A week ago, I had the opportunity to visit one of the beautiful and green country but witnessed the hardships that people are facing. Within a week, the currency exchange of 1 dollar equals to 200 Lankan rupees rose to 280 Lankan rupees.

Sri Lanka is now struggling under a severe foreign exchange crisis with dwindling reserves. The pandemic has caused a major blow to Sri Lanka’s economy that depends largely on tourism and commerce, with the government estimating a loss of $14 billion in the previous two years.

The virus spread has had a significant impact on the tourist industry, which accounts for 10% of the country's GDP. Several nations, including Canada, have lately issued travel warnings to its nationals from visiting the island country owing to the foreign exchange problem, which will not assist the business. The Island country's three biggest sources of inbound tourism are the United Kingdom, India, and Russia.

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While visiting the nation, I went to different cities --- Galle, Colombo, Kandy and other tourist destinations ---- where two things were common. First, it has breath-taking natural beauty and second, all locals ‘accused’ government of not handling the economic situation properly.

In Galle, which is a beach destination and a huge hub of water sports and European tourists, shack owners complained of not able to cook food for the tourists as they are facing shortage of the kerosene or gas pipeline. “First, COVID and then now this shortage of fuel has left us helpless. We can’t prepare half the dishes as they require gas and with the shortage and prices soaring, we can’t afford,” said a shack owner, on the basis of anonymity.

One of the major attractions includes Galle Fort (similar to India’s Goa) which is consists of guest houses and restaurants for the tourist was in dark due to electricity cut. In Sri Lanka, if you are roaming around in the evening, there would be hardly few restaurants lit as they could afford generator and kerosene.

Travelling around the scenic country is becoming expensive day-by-day due to the rise in price of the petrol and diesel. There has been no petrol pump where there were queues less than a kilometre or else they were shut as they ran out of it. On the basis of anonymity, one of the auto driver said, “The prices have increased within days. We are standing for at least 3-4 hours a day in the queue to fill our tanks and sometimes, the petrol pumps run out of the fuel. If the prices continue to soar, small individuals like us, would be out of work.” Russia-Ukriane war seems to have effected the nation immensely and it can be witnessed through people’s anger.

Another appalling thing which I witnessed was that none of the currency exchange banks (private or government) were ready to accept the Sri Lankan rupees as the exchange rate was fluctuating frequently. Meanwhile, the locals have also stopped accepting the Sri Lankan rupees as the currency is very unstable and are taking in money in dollars.

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Since January, Sri Lanka has struggled to acquire dollars to pay for increasingly expensive gasoline exports, with its foreign currency reserves falling to $2.31 billion in February.
According to the most recent government figures, Sri Lanka's inflation rate in February was 15.1 per cent, one of the highest in Asia, with food inflation reaching 25.7 per cent.

Additionally, cash-strapped Sri Lanka has acquired a $1 billion credit line from India to buy desperately needed food and medication, as the IMF confirmed it would consider discussing a possible rescue.

Meanwhile, a top Chinese official said on Monday that China is contemplating giving a $1.5 billion loan line to Sri Lanka, with a decision likely shortly, as part of efforts to assist the island nation in the midst of its worst economic crisis in decades. Qi Zhenhong, China's ambassador to Sri Lanka, told reporters that the two countries were also negotiating a separate loan of up to $1 billion, which the Sri Lankan government had asked. On March 18, the South Asian country was given a $500 million loan by the China Development Bank, he said.

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