Five people, including a member of parliament, were killed and about 200 injured after clashes broke out in the Sri Lankan capital Colombo and parts of the country on the 9th.
Sri Lankan Prime Minister Mahinda Rajapaksa announced her resignation on the same day. Protests and clashes continued as protesters demanded the resignation of President Gotabaya Rajapaksa.
Some people stormed Mahinda Rajapaksa's house and the Prime Minister's Office in Kurunegrad County, Northwest Province, and protesters set fire to Rajapaksa's ancestral home in Hambantota Port. Some members of Congress, The home of the former minister was also set on fire.
Embassy reminds Chinese citizens in Sri Lanka to strengthen security
On May 9, bloody clashes occurred in places such as Colombo, the capital of Sri Lanka, and caused heavy casualties. At present, Sri Lankan police have adopted curfew measures. The Chinese Embassy in Sri Lanka reminds Chinese citizens and institutions in Sri Lanka to raise their awareness of self-protection, track the security situation, and strengthen security precautions. In case of emergency, please call the police in time and contact the Chinese Embassy in Sri Lanka for assistance.
Sri Lanka emergency numbers:
Police (National): (+94) 118, 119
Police (Colombo): (+94) 112433333, 112322485
Tourist Police (Colombo): (+94) 112421070
Ministry of Foreign Affairs Global Consular Protection and Service Emergency Hotline (24 hours):
+86-10-12308
+86-10-59913991
Consular protection and assistance number of the embassy in Sri Lanka:
(+94) 112676033
According to CCTV news reports, on the afternoon of the 9th local time, Sri Lankan Prime Minister Mahinda Rajapaksa announced his resignation.
Sri Lanka announces nationwide curfew
According to CCTV News, on May 9, local time, due to the escalating clashes between Sri Lankan government supporters and some peaceful protesters in the capital Colombo, the Sri Lankan police announced a curfew on several areas of the capital Colombo and Western provinces shortly after the incident. Around 15:00, a nationwide curfew was announced.
At present, 23 people have been injured in clashes between government supporters and peaceful protesters on the 9th.
Sri Lankan Prime Minister Rajapaksa posted on social media, calling on the public to exercise restraint, "remember that violence only brings violence" and said "the economic crisis we are in requires an economic solution from this government."
It is reported that after Sri Lanka announced a nationwide curfew on the afternoon of the 9th, traffic jams appeared on the streets of the capital Colombo, and the order was once in chaos. At present, the police have begun to divert vehicles, and some people have spontaneously helped to maintain order.
Earlier, on May 9, local time, the Sri Lankan police announced a curfew in several areas of the capital Colombo. According to CCTV News, citing Sri Lankan media reports, violent clashes broke out between protesters and police at Galle Face Square in front of the Presidential Secretariat, causing 23 injuries.
According to overseas reports, on the evening of March 31, local time, hundreds of protesters in Sri Lanka gathered near the presidential residence and launched an attack. The local police arrested 54 people and injured nearly 50 others.
The country has entered a state of emergency twice
On May 6, local time, Sri Lankan President Gotabaya Rajapaksa announced that the country will enter a state of public emergency from midnight that day to maintain social order.
Protests and strikes broke out in various places as Sri Lanka faced problems such as lack of foreign exchange, shortage of materials, high prices, and shortage of power supply.
The Covid-19 pandemic has battered Sri Lanka's tourism industry, and the country's economy has gone from bad to worse. Unable to pay for fuel imports, the country experiences daily power outages; hospitals also lack critical medicines, and the Sri Lankan government has had to appeal to Sri Lankans overseas to donate money and goods for their homeland
Sri Lankan Finance Minister Ali Sabri warned that the country's current available foreign exchange reserves are less than 50 million US dollars, while the foreign debt has reached 51 billion US dollars, and the economic crisis facing the country will continue for at least two years.
Sri Lanka is currently negotiating a loan program with the International Monetary Fund, but the governor of Sri Lanka's central bank said it would take months to get any loan assistance.
This is the country's second state of emergency in five weeks. President Gotabaya Rajapaksa declared a public emergency in the country on April 1 and lifted it at midnight on April 5.
Western sanctions, Russia, Sri Lanka in trouble
In Sri Lanka, most energy companies rely on coal and oil to generate electricity, and these fuels need to be imported from abroad. After the Russia-Ukraine conflict, Western countries continued to impose sanctions on Russia, restricting Russia's energy exports, resulting in high international energy prices.
Sri Lanka is really feeling the impact.
According to China Youth Daily Youth Reference, 32-year-old Hassan Perris runs a small wood-cutting factory. When the power goes out, he can only give workers vacations. Rising food prices drained Perris' savings, and he pawned the family's gold, sold his truck, and saved the money to buy eggs for his pregnant wife.
"I don't remember the last time I ate chicken," Perris said. "I was scared and didn't know what to do with it." Without electricity and diesel, he and five employees were idling in the yard arranging wood.
Having never experienced such a severe power outage, most medium and small businesses in Sri Lanka do not have generators for backup power, and the unstable supply has left them struggling, with export-oriented businesses bearing the brunt.
Karaji, the head of the first assembly factory, said that it is not only how to keep the sewing machines running, but also how to retain skilled workers. Even if workers are willing to share the joys and sorrows of the factory, it is difficult for them to get to the factory to get to work - nearly 50% of the local public transportation is stopped, and commuting has become a challenge.
“It used to take 15 minutes to get a bus, but now it takes an hour or two,” said Chaturi Dileka, a 30-year-old office assistant. “Sometimes the bus is driving and stops on the road because it runs out of gas. ."
The power outages and oil cuts are not only hurting the manufacturing industry, but also the tourism industry, the backbone of the Sri Lankan economy.
The seaside town of Hikkaduwa was once a popular destination for tourists from Europe and the Middle East. The once bustling streets are now deserted. Every day at Neraka Gunaras's 30-room hotel, he faces the empty lobby in silence. The hotel could not guarantee the "basic services required by the guests", and tourists checked out one after another.
"Guests keep calling for food... We can't promise guests anything. Even ourselves are struggling," Gunarasne said.
Sri Lanka's poverty rate will rise further in 2022 as Sri Lanka's economic crisis worsens, the World Bank said in a report released on April 26, according to CCTV News. Sri Lanka's poverty rate will rise to 11.7% in 2022, compared to 10% in 2019.
The worst economic and financial crisis in decades
On April 4, Sri Lanka's central bank governor, Ajith Nivard Cabraal, decided to resign. A day later, Sri Lankan Finance Minister Ali Sabri also announced his resignation less than 24 hours after taking office.
Behind this, Sri Lanka is experiencing the worst economic and financial crisis in decades, making these two important positions in the financial supervision departments into "hot potatoes".
As of the end of February this year, Sri Lanka's foreign exchange reserves were only 2.31 billion US dollars, not only unable to repay foreign debts, but also difficult to maintain hundreds of millions of dollars in monthly payments for imported fuel, food, medicine and other materials.
Affected by this, food prices in Sri Lanka soared rapidly, and the food inflation rate once reached 25.7%; the exchange rate of the Sri Lankan rupee against the US dollar once fell by nearly 50%, hitting the lowest point in the past 10 years.
What embarrassing Sri Lanka is that since March 31, the rolling blackout time in Sri Lanka has been extended from 10 hours to 13 hours a day. The reason is that the government is unable to pay 52 million US dollars for imported diesel, resulting in 37,000 tons of diesel being stranded in ports. discharge.
A Wall Street macroeconomic hedge fund manager pointed out to the 21st Century Business Herald reporter that if Sri Lanka is unable to fulfill its foreign debt repayment obligations, its international credit rating will further decline, and it will be more difficult to raise foreign exchange funds such as US dollars to pay foreign debts, and the economic and financial crisis may intensify.
An emerging market investment hedge fund manager revealed that the reason why Sri Lanka has encountered such a severe economic and financial crisis is that another behind the scenes that cannot be ignored is that its foreign trade settlement and financial markets are highly dependent on a few currencies such as the US dollar.
According to data released by the Central Bank of Sri Lanka, more than 60% of the country's repayment currently requires the use of US dollars, and the sharp reduction in US dollar reserves is precisely the key factor that caused them to encounter the foreign debt repayment crisis and the payment storm for imported goods.
KPMG’s previous research report pointed out that the single dollar settlement makes Sri Lanka’s import cost more expensive, whether it is grain, sugar, milk powder, gas or medicine, because the Federal Reserve has tightened monetary policy sharply and the dollar has appreciated. Indirectly, it pushed up Sri Lanka's price rise sharply and drained its foreign exchange reserves at a faster rate.
Triple crisis
In the view of many hedge fund managers, Sri Lanka is currently experiencing a triple economic and financial crisis.
First, the risk of economic recession has increased.
Since Sri Lanka's economic development mainly relies on textile exports and tourism, after the outbreak of the epidemic in early 2020, tourism revenue plummeted, causing the country to lose about US$3 billion in tourism revenue in the past two years; textile exports have suffered from the impact of the epidemic and fierce market competition. It is also faced with the dilemma of continued decline in export revenue. Data show that Sri Lanka's textile and clothing exports in 2020 were US$4.423 billion, a year-on-year decrease of 21%. Although clothing exports recovered last year, it has not yet returned to the pre-epidemic level.
On April 6, the "Asian Development Outlook 2022" report released by the Asian Development Bank showed that in the face of a series of challenges brought about by high debt, low foreign exchange reserves and high inflationary pressures, Sri Lanka's economic growth rate will decline to 2022. 2.4%.
However, many Wall Street investment institutions believe that the above-mentioned "Report" of the Asian Development Bank is too "optimistic". At present, Sri Lanka is suffering from an increasingly severe debt crisis and high inflation pressure, and its economic fundamentals are on the verge of recession.
The second is the aggravation of the currency crisis.
Under the resonance of Sri Lanka's foreign exchange reserves continuing to be "urgent" and high inflationary pressure, the exchange rate of Sri Lankan rupee against the US dollar has plummeted by about 50% in the past month. If the Sri Lankan government is unable to guide the domestic currency to stabilize and rebound, the currency crisis will trigger more funds Outflow, increasing the possibility of the outbreak of economic and financial systemic risks.
Third, the debt crisis followed one after another.
As mentioned above, Sri Lanka's current available foreign exchange reserves are less than US$50 million, while its external debt has reached US$51 billion.
How come?
"However, these economic and financial crises did not appear overnight. The Sri Lankan government launched a series of economic reform policies in 2019, which seems to have planted the seeds for this crisis." The above-mentioned Wall Street macroeconomic hedge fund manager bluntly said.
The so-called series of economic reform policies are mainly the tax reduction policies and organic agriculture reform programs implemented by the Sri Lankan government in the past three years. Originally, the Sri Lankan government hoped to implement the organic agricultural reform plan to promote the realization of "green planting" in the entire country's agriculture and create higher agricultural export income; while the tax reduction policy can stimulate the increase of people's consumption demand and inject stronger momentum into the country's economic growth.
However, there is a huge difference between reality and ideal.
Since the introduction of organic agriculture, large tracts of farmland in Sri Lanka have been abandoned, agricultural productivity has dropped sharply, and agricultural production has been cut by nearly half, resulting in a shortage of other food crops that previously had low yields. Therefore, less than half a year after the implementation of organic agriculture, Sri Lanka has successively lifted the import restrictions on chemical fertilizers for tea and the import ban on other agricultural inputs.
The tax reduction plan not only stimulates people's consumption, but also sets off a boom in people's purchase of imported goods, which increases the amount of government's purchase of imported goods and accelerates the "consumption" of foreign exchange reserves. Besides, the tax reduction policy has also led to a significant reduction in government fiscal revenue, making it impossible to pay. Bulk import bills.
"Behind this, the above-mentioned economic reform plan of the Sri Lankan government may not be in line with the national conditions." In addition, the tax reduction policy may not fully take into account factors such as the national fiscal balance and the stability of foreign exchange reserves, which will accelerate the consumption of foreign exchange reserves and eventually lead to debts. The crisis broke out; in addition, the tax cut policy reduced the government's fiscal revenue, and it was unable to purchase more imported fuel and daily necessities to meet the needs of the people, resulting in economic problems such as power supply.
In the past two years, Sri Lanka's foreign exchange reserves have plummeted by about 70%, which has also made it inevitable for the country to fall into the quagmire of foreign debt payment defaults.
The reason why Sri Lanka has suffered a debt crisis is also due to factors such as the epidemic. Due to the outbreak, Sri Lanka has lost about US$4 billion in tourism business revenue every year, which has caused a sudden decline in its ability to absorb foreign exchange reserves.
It is worth noting that the Sri Lankan debt crisis alarm has "sounded" in the third quarter of 2021.
Sri Lankan Finance Minister Mahinda Rajapaksa said on September 7 last year that Sri Lanka was facing a foreign exchange crisis. Due to the impact of the epidemic, there was a serious shortage of foreign exchange income, and Sri Lanka’s foreign exchange income fell more than expected, reaching $7.5 billion to $8 billion.
