House of Commons Library publications on the rising cost of living in the UK, including causes of inflation, the effect on households, and Government support.
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UK response to the human Rights and economic situation in Sri Lanka (326 KB , PDF)
Overview of the crisis and economic problems
Mass protests begin in February 2022
Protests began building in February 2022 in Sri Lanka, in response to the country’s worst economic crisis since it became independent nearly 75 years ago. The protests, according to the International Crisis Group (ICG) “morphed into a nationwide uprising”.
Protestors were calling for the resignation of President Gotabaya Rajapaksa, who came to power in November 2019, and the removal of the Rajapaksa family from politics. Gotabaya’s brother, Mahinda Rajapaksa (who was President 2005-15), served as his Prime Minister, and other family members have held key Government posts.
By July 2022, both the Prime Minister and President had resigned.
This is a remarkable turn-around in their political fortunes. As well as victory in the 2019 Presidential elections, Gotabaya Rajapaksa’s Sri Lanka People’s Front party had won a two-thirds super-majority in legislative elections in August 2020.
The turning point in the protests appeared to come on 31 March when large crowds gathered near the President’s residence, and the police attempted to disperse the crowds with tear gas and water cannons, leaving near 50 people injured, and 45 people were later arrested. NGOs claimed that the police had used “excessive and unprovoked force” against protestors, and that several of those arrested were beaten in custody.
Roots of the economic crisis
The Covid-19 pandemic was a huge blow to Sri Lanka’s economy, and in particular its tourist industry, which was already suffering from the aftermath of the 2019 Easter bombings. Tourism before the pandemic was providing around five % of Sri Lanka’s Gross Domestic Product (GDP), and the industry is an important provider of foreign exchange, particularly US dollars, that Sri Lanka requires to finance its imports of essential goods, on which it is heavily reliant, and to pay its huge foreign debts.
Gotabaya Rajapaksa’s economic policies have also been blamed for making the economic crisis worse. When he first came to power in 2019, his Government implemented significant tax cuts, for example cutting the value added tax to 8% from 15%. In April 2021 the Government also decided to ban the import of fertilizers. Although they later reversed the ban after protests, this was too late to stop a dramatic fall in crop yields, worsening the already serious shortages of food.
The ICG also blamed “Gotabaya’s authoritarian, centralised and non-transparent decision-making”, describing his administration as “surrounded by cronies and oblivious to criticism”, and that it rejected repeated calls for a course correction as the crisis deepened.
All these economic challenges are making Sri Lanka’s debt problems worse. The country owes more than $51bn (£39bn) to foreign lenders. At the end of the civil war in 2009, then President Mahinda Rajapaksa, took out a significant amount of foreign loans to help pay for the war and to finance a huge infrastructure drive. When a new Government came into power in 2015, it was already warning that these debts were not sustainable and it looked to restructure some of them.
Prime Minister replaced, 9 May 2022
On 9 May Mahinda Rajapaksa resigned as Prime Minister. The BBC said his departure was “no surprise”, as there had been days of speculation he would go – after reports his brother had told him he needed to quit. However, Mahinda Rajapaksa had held on “with the view that as the more popular of the brothers, he shouldn’t be the one to go”.
A national curfew was announced on the day of his resignation, as violent protests continued. It was reported that 151 people had been admitted to hospital following protests that day. Five people were also reported to have been killed, including an MP from the ruling party who was said to have fired shots at protestors after being surrounded by a mob, and was then killed himself.
On 12 May Ranil Wickremesinghe, a veteran politician from the opposition United National Party, was appointed as the new Prime Minister. He has served five previous stints in the role.
The main opposition SJB party, or Samagi Jana Balawegaya, declined to join a unity government led by Wickremesinghe, but said it would “unconditionally support the positive efforts to revive the economy“. Previously the party had said it would not support a new Government unless the President stood down.
The second-largest opposition party, the Sri Lanka Freedom Party (SLFP), said it would join the cabinet.
Sri Lanka defaults on its debts, 20 May 2022
On 20 May Sri Lanka failed to pay $78m (£63m) in debt interest payments, causing two of the world’s biggest credit rating agencies to declare it had defaulted.
This came after the expiration of 30-day grace period to come up with the payment.
The Government had already started talks with the International Monetary Fund (IMF) over a bailout to help it renegotiate its debt agreements with creditors.
New Prime Minister announces plans to slash expenditure
Reuters reported on 24 May that the new Prime Minister Ranil Wickremesinghe would present an interim budget within six weeks, “slashing infrastructure projects to re-route funds into a two-year relief programme”.
On 25 May it was announced that the Prime Minister will also take on the role of Finance Minister.
Wickremesinghe began negotiations with the IMF saying he hoped to secure a “sustainable loan package” from the organisation, while also committing to undertake structural reforms to draw new investments into the country.
He also expressed concerns over food shortages from August onwards, saying he was looking to foreign aid from allies and multilateral agencies to ensure supplies of staple foods such as rice.
Protests continue, Gotabaya Rajapaksa resigns
Protests and economic shocks continue
On 1 June, the Financial Times reported that the government was applying for aid from a food bank operated by the South Asian Association for Regional Cooperation to secure supplies of rice and other staples to help combat shortages of basic foodstuffs.
The paper also reported that fuel shortages were resulting in the closure of power stations leading to long blackouts, that hospitals were postponing treatments due to lack of medicine and aid groups were warning of a “worsening hunger crisis owing to double-digit inflation”.
On 6 July, hundreds of protesters gathered near the parliament building in Colombo to launch what they called the “final push” to remove the government.
On the same day President Rajapaksa announced he had spoken to his Russian counterpart Vladimir Putin, requesting credit in order to import fuel, calling the conversation “very productive”.
Gotabaya Rajapaksa’s resignation
On 9 July mass protests in the capital escalated, and the demonstrators broke in President Rajapaksa’s residence “signalling that the government had effectively lost control of the city”. The President had reportedly been evacuated from his residence the day before.
Later that day the Speaker of the Parliament, Mahinda Yapa Abeywardena, announced on television that Rajapaksa agreed to step down on 13 July. The Prime Minister Ranil Wickremesinghe also said he would resign “in response to pressure from party leaders”, and that an all-party government would be formed.
On 11 July Wickremesinghe confirmed his plans to resign, along with the rest of his government, but once a new all-party cabinet was in place.
Gotabaya Rajapaksa flees country, state of emergency declared
On 13 July, the Sri Lankan air force announced that President Rajapaksa had fled the country on one of their planes alongside his wife, travelling to the Maldives.
The Parliamentary Speaker announced that Rajapaksa had named the Prime Minister Ranil Wickremesinghe as acting President in his place. Though there were some questions as to when the transfer of power took place, as Rajapaksa did not formally resign until two days later.
The Financial Times reported that “Rajapaksa’s delay in tendering his resignation was probably intended to help him retain diplomatic immunity while he sought refuge in a country that would take him in”. And that he was likely to be cautious about where to travel to as he could “face prosecution relating to his role in the final, bloody phase of Sri Lanka’s war against Tamil separatists in 2009, when he was defence secretary”.
On the day Rajapaksa fled Wickremesinghe declared a national state of emergency and a curfew in Western Province, that included the capital Colombo where the protests were centred. He commented that “We can’t tear up our constitution. We can’t allow fascists to take over”, and that he “ordered the military to do whatever was necessary to restore public order”.
On 15 July, announcing that he had now received Rajapaksa’s resignation, the Parliamentary Speaker said that Wickremesinghe would remain as acting President until a new head of state was elected.
Parliament elects Wickremesinghe as President
On 20 July, Sri Lanka’s Parliament voted to make acting President Ranil Wickremesinghe the country’s new permanent leader. Wickremesinghe won 134 votes, compared to 82 votes for Dullas Alahapperuma, from the Sri Lanka People’s Front party of Mahinda Rajapaksa, (the Parliament has 225 seats).
In a speech after the vote Wickremesinghe called for opposition parties to work with him saying “I am ready to have a dialogue with you”.
The new President was already “unpopular” according to the Financial Times, writing that he is “reviled by the protesters, who accuse him of lacking legitimacy and say he protected Rajapaksa from allegations of corruption in a previous stint as prime minister between 2015 and 2019”. The newspaper also reported that earlier in the month “protesters ransacked Wickremesinghe’s office and burnt down his private residence”.
The BBC reported in September that the protests have largely ended due to the action of the Government, including arrests, since Wickremesinghe took over the Presidency, and that “dozens have been detained by police in recent weeks, with most since released on bail”.
Three student activists detained by police, were reported to have been held under an anti-terrorism law, drawing criticism from human rights organisations.
On 2 September former President Gotabaya Rajapaksa returned to Sri Lanka. A defence ministry spokesman told BBC News that Mr Rajapaksa “would be given security as a former president”.
Sri Lanka’s economic crisis continues. Its annual inflation rate increased to more than 70% in August, and food prices rose by nearly 85% compared to a year ago.
The country agreed a preliminary deal with the IMF in September for a loan of about $2.9 billion. The Government is still in talks with the international lender, however, on the details of the package and the reforms it will be required to undertake to access the finance. The Sri Lankan negotiating team described talks held at the beginning of November as “productive”.
Documents to download
UK response to the human Rights and economic situation in Sri Lanka (326 KB , PDF)
Information on business and consumer confidence surveys. This is generally released ahead of official statistical data and can indicate changes to the economic outlook.
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