‘A long time to starve’: How Sri Lanka went from booming to broke

“It takes a long time for a Sri Lankan to starve,” executive director of the Centre for Policy Alternatives (CPA) Paikiasothy Saravanamuttu says.

He’s answering a question about why Sri Lanka’s situation is not worse given the country is bankrupt and doesn’t have enough money to import the food it needs.

He says the country is fertile and can actually grow a lot of food – although even this advantage has evaporated thanks to a ban on inorganic fertiliser.

The ban on fertiliser was lifted last year, but fertiliser is now unaffordable for many farmers and Sri Lanka’s rice plants are yellowing from a lack of nutrients.

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The truth of it is many Sri Lankans are simply hiding how hungry they are.

When Anglican Bishop of Kurunegala Keerthisiri Fernando’s parishioners started feeling the effects of Sri Lanka’s economic crisis on income and inflation they stopped drinking milk powder.

Then they cut back on food portions, instead of three curries they made do with one.

“Now, even with that, they can’t survive.”

The World Food Programme says half of Sri Lanka’s households are pawning items or borrowing money in order to eat, and it classifies 36% of Sri Lanka’s population as food-insecure – in 2019 that number was 9%.

Unicef says Sri Lanka has the world’s sixth-highest rate of child malnutrition, with rising numbers of children under five years old who are underweight, wasting or whose growth is stunted – although the Government has rejected the conclusions of that particular report, saying it is based on old data.

Institute of Policy Studies director Dushni Weerakoon says the rapid shift in fortunes has been humiliating for many in Sri Lanka.

She says Sri Lanka used to lead the South Asian region in human development indicators like health and literacy, its streets were cleaner and roads safer – but not any more.

”More and more I see [middle-class] people coming in small cars in the evening and they have brought string hoppers and all to sell for an income.

”A little bit extra food or fruit they’re bringing it into town to sell, they wouldn’t have done that before because they would have been too proud to drive in, open their car boot and sell food.”

In 2009, the Colombo Stock Exchange was the second-best performing in the world and 10 years later the World Bank officially recognised Sri Lanka as an upper-middle income country.

Between 2006 and 2013, the number of people living in extreme poverty in Sri Lanka shrank from 11% to 1.3%.

Yet since the Covid-19 pandemic, things have been very different: between 2021 and 2022, an estimated half a million jobs were lost and food inflation last year exceeded 80%.

The immediate story starts in 2019 with major tax cuts that meant 1 million fewer people were paying tax by 2021.

Covid-19 was another trigger point, because it gutted tourism exports and Sri Lankan workers had to leave places like the Middle East, meaning they could no longer send remittances back.

All of this was problem for a country with debts that were more than 60% of gross domestic product in 2021 and where 40% of the Government’s budget was often spent paying interest on foreign debt.

However, Sri Lanka also did not go to the International Monetary Fund for assistance in restructuring its debts, choosing to use its foreign currency reserves to pay down debt until the moment it almost ran out of foreign currency.

To shore up foreign reserves the Government accelerated the implementation of an election promise to ban the use of chemical fertiliser – which is imported – but the sudden implementation of this rule hurt crop yields, including for important export products like tea.

In combination, all of this led to shortages of essentials like food and fuel, which has caused increased hardship across most classes of society, especially the urban poor and the middle class.

Fernando says most of his struggling middle-class parishioners are too proud to ask for help. He has to approach them and ask if they need assistance, and even then they don’t want other parishioners to know about their situation.

There are other stories, too. In recent times some Sri Lankans have spoken of a rise in rear-end car accidents. More and more car vehicle brakes are failing because people can’t afford the maintenance on their cars.

Another middle class businessman puts it this way: in every country in the world people wake up and go to work, but in Sri Lanka it is a struggle to even do that.

Public transport is poor but so is the quality of most cars on the roads – because the taxes on them increase their price to three or four times their value, so people can only afford to purchase or lease low-quality vehicles.

Even if people can make those cars work, petrol has been rationed to 20 litres per week.

The Disinformation Project’s Sanjana Hattotuwa grew up in Sri Lanka and on a recent trip back he took photos of everything that was unusual or out of place: bald tyres on parked vehicles, delivery trucks and unused tuk-tuks which hadn’t been used so mould and algae were growing on them, signs on lampposts for finance companies promising the highest rates for jewellery and construction sites with nobody in them because the price of completing the work has risen eight-fold.

When it came to teashops and bath kades (small eateries) he noticed that, without exception, within a 3km radius of his former home all of them had shutdown.

“It’s a f…ing disaster at certain levels, I don’t know what the hell they’re doing. I can’t even bear to think of it.”

When you ask opposition politician Harsha de Silva what went wrong in Sri Lanka, he has a lot of answers.

He goes through some of them on the balcony of a restaurant area at the Galle Face Hotel in Colombo, but starts off by pointing to a mobile phone.

“The phone that you’re holding is made in 43 countries and guess what, Sri Lanka is not one of those 43 countries.”

De Silva says Sri Lanka had an opportunity to specialise and be part of global supply chains because it was in a prime location for it. Not only is Sri Lanka in Asia, but it is on a major maritime route linking China with Europe and the Middle East.

He says the mistake Sri Lanka made was an ideological one, it went down the path of a State-dominated economy that tried to protect too many domestic industries and do everything itself.

The apparatus of the Sri Lankan bureaucracy grew alongside this, creating a 1.5 million-person strong civil service.

According to Sri Lankan think tank Advocata this is well in excess of what neighbouring countries have: in India there is one civil servant for every 177 people while in Pakistan that number is one for every 117, in Sri Lanka there is one civil servant for every 14 people.

Corruption is another potential drag on the public purse, with kickbacks allegedly padding out the cost of debt-funded projects. The scale of corruption in Sri Lanka is so vast it is often openly acknowledged by the country’s politicians.

De Silva says when he ran for his seat he was advised to bribe his voters with a quarter-bottle of arrack – a strong alcoholic drink produced from the fermented sap of coconut flowers.

“I have never, ever, ever given anybody a quarter-bottle of arrack in my entire campaign … I have told them, nothing I will give you, all I will give you are ideas to think about.

“If you think I’m making sense you vote for me, otherwise don’t vote for me, I don’t need your vote.”

Another opposition politician, Sarath Fonseka, says the country’s politicians regularly take kickbacks from major projects – effectively robbing the country of money – and of those that aren’t corrupt there are a significant group of people who don’t care that the political culture is corrupt.

“I personally believe the majority of the people in the Parliament are corrupt, irrespective of the parties, but our party a little less.

“But I can’t give assurance that everybody is clean in our party, there are corrupt people, obviously, if you talk about their track record.”

De Silva says corruption issues, protectionism and subsidies for domestically-owned businesses and state-owned enterprises scared away foreign investment and meant domestic industries weren’t incentivised to develop better export products.

“It’s ideology: we can do it ourselves, we will put big tariff walls around the country, we will not enter into Free Trade Agreements, we will not liberalise this market, we will protect the local guys, we are this-that, we have some 2500-year history [as] a bunch of bad-ass pig-headed Sinhala Buddhists.”

To make his case he cites the relatively similar positions of Vietnam and Sri Lanka in the mid-1990s.

In 1995, Sri Lanka exported US$3.4b worth of goods and services while Vietnam exported US$5b.

However by 2017, Vietnam’s exports had grown to US$235b while Sri Lanka’s exports had only risen to US$12.4b.

De Silva believes Sri Lanka really has no excuse for its performance because at the very least it is a country rich in mineral resources. To make his point de Silva points at the ground beneath his feet and talks about graphite: some of the purest graphite in the world is found in Sri Lanka.

On top of this, de Silva says the success of Sri Lanka’s Diaspora shows the nation had the human resources it needed to succeed: Sri Lankans are the fourth-wealthiest ethnic group in the United States and Australia’s highest-paid chief executive – Shemara Wikamanayake – is also a Sri Lankan.

The sense of a paradise lost runs through much of the criticism Sri Lankans have of what is happening in Asia’s oldest democracy in the decades since independence.

In 1964 Singapore’s revered leader Lee Kuan Yew came to Sri Lanka and gave a speech where he voiced his hope that one day the city of Singapore would be just as wealthy as Colombo.

This anecdote is regularly repeated by Sri Lankans to illustrate just how far short of its potential Sri Lanka fell.

But when de Silva cites it he is talking about another opportunity lost: how Sri Lanka nationalised Esso and Caltex’s oil operations back in the 1960s which caused both companies to relocate to Singapore and use that country’s port instead.

De Silva is hopeful of a deal from the International Monetary Fund, but he also hopes the country doesn’t repeat what he sees as the mistakes of the past – especially when it comes to issues like tariffs and trade.

“The next 50 years, growth, everything, is going to happen in the Indian Ocean, the Pacific Ocean – we have to leverage that.”

Weerakoon says in the shorter-term the Sri Lankan Government has created a food policy committee to develop a basic nutritious meal package that can be provided at a price affordable to the bottom 60% of households with the assistance of the World Food Programme.

“It’s a tragedy because when you really look at it this country has everything. If you travel around the country it’s amazing.

“Sri Lankans who don’t thrive in this country, when they go out they thrive in their professions.

“We had the human resources, we had everything.”

Dileepa Fonseka’s trip to Sri Lanka was funded by the Asia New Zealand Foundation.