Sri Lanka is currently in the throes of the worst economic crisis in its recent history, which yesterday led to protests right outside the President’s residence, and curfews across Colombo, the capital. The country faces bankruptcy. The masses are being tortured by spiralling prices, 13-hour long blackouts, and a lack of basic medicines, cooking gas and food. What is happening in Sri Lanka is not unique to that country. It is only an acute expression of the worldwide crisis of capitalism, that is crushing poorer nations. The sort of social unrest we are seeing in Sri Lanka, we can expect to see all around the world in the period to come.
In recent weeks, protests have been erupting – spontaneously and without any leadership from the established political parties – against spiralling inflation and worsening conditions that have seen power cuts extend from 4 hours, to 7 hours, now extending for 13 hours a day. The conditions of the masses are becoming desperate.
On Thursday 31 March, thousands of people came out onto the streets in various districts in the capital, Colombo. These protests began peacefully, with men and women – some even carrying their babies – coming onto the streets with hand-written placards and candles demanding the resignation of President Gotabaya Rajapaksa.
The placards gave a glimpse of the burning class anger among the masses, who have been driven to desperation by the crisis of capitalism: “Enough is enough,” “Stop robbing our children’s future!” “We too had kids,” read the placard carried by a mother cradling her infant child.
A thieving ruling clique
The thieving ruling clique was a particular focus of the hatred of the masses. “Our people deserve a better life, distribute the stolen money among them,” read one placard, whilst another read, “Pay for fuel with Pandora dollars,” referring to members of the Rajapaksa’s clan who have turned up in the Pandora papers, having stashed tens of millions of dollars in off-shore accounts.
Another placard read, “The bermuda triangle,” with three sides labelled “GR”, “MR”, and “BR” – referring to the mysterious disappearance of the country’s money in the hands of President Gota Rajapaksa and his brothers Mahinda Rajapaksa (current Prime Minister and President in 2005-2015) and Basil Rajapaksa (Finance Minister, also referred to as “Mr Ten Percent” for the cut he takes in all government contracts).
Thousands of protesters descended upon the home of the president himself, at which point things quickly turned violent as police fired water cannons, tear gas canisters and bullets into the crowds. One person is reported to have died.
Upward of a thousand people blocked the Jubilee Post junction leading into the Mirihana suburb where President Gota himself resides, shouting “go home Gota!” Meanwhile, thousands more protested directly outside his residence. Van-loads of police were sent into the neighbourhood to disperse the crowds, whilst rumours circulated (since denied by the government) that two private jets were on standby to escort members of the ruling Rajapaksa family out of the country.
The government has responded with widespread curfews, repression and arrests, and has denounced the protests as the result of “extremist agitators”. One minister even described protesters as “terrorists”. This brutal clique currently in government has a blood-soaked history going back to its crushing of the Tamils in 2009, and may well be preparing repression. Agent provocateurs were undoubtedly sent into the crowds to encourage violence in order to justify repression, but the masses have their backs up against the walls. Life is becoming unlivable. It is not clear that repression will stop fresh mobilisations.
The social explosion comes on the back of months of deteriorating conditions for the masses. Life has become unbearable as the country has slipped towards bankruptcy. This year, Sri Lanka is facing $7 billion in debt and interest repayments, $1 billion of which is due in July. But with just $500 million in foreign reserves, the government is completely unable to pay its debts.
Dwindling foreign currency reserves have led to restrictions on imports, which the country is increasingly unable to pay for. There are shortages of basic goods, including fuel, cooking gas, milk powder, paper and cement. Hospitals are now reaching a critical situation as they run dangerously low on essential medicines. And with the country out of fuel, electricity blackouts have become longer and longer, exacerbated by a drought which has cut electricity from hydroelectric dams. On Thursday, electricity was out for 13 out of the 15 waking hours of the day!
Shortages of basic goods are driving up inflation, which officially stands at 18.7%. However, food inflation is at 30.2%, whilst petrol prices have doubled since January. People are literally queuing for days at petrol stations to fill up their tanks, only to be told that there is no fuel. Many cannot even afford candles to light their homes when the electricity goes out, as even the price of a pack of candles has risen to 500 Rs each!
The situation is now unbearable for the masses, and it is getting worse.
A crisis years in the making
This is a crisis that has been years in preparation, and indeed, Sri Lanka is only the most acute expression of a crisis that is wracking every country around the world. As national competition has led to rising protectionism and a retreat of “globalisation”, rich countries have begun reshoring capital, and central banks in the imperialist countries are attempting to tame inflation with interest rate hikes, poor countries have been crushed between the twin millstones of inflation and unpayable debts, as we have analysed elsewhere. This is preparing revolutionary events – not in one or two countries, but in entire stretches of the globe.
The rich countries could cushion themselves somewhat from the worst of the crisis in 2020 with government spending. For the poorer countries, this was never an option. The crisis that accompanied the pandemic in 2020 devastated Sri Lanka. Wages fell by an average of 35%. Its most important sources of foreign revenue – tourism and remittances – dried up as tourists stayed away and workers returned home from abroad. The tourism sector was already reeling from the effects of the Easter bombings in Colombo in 2019.
This has been a recipe for the quick evaporation of the country’s foreign currency reserves. And yet, the government has religiously continued to pay its foreign debts, further exhausting its reserves. The exhaustion of these government reserves has led to the downgrading of Sri Lanka to “junk” status by credit rating agencies. Suddenly, Sri Lanka was locked out of credit markets. Its main means of staying afloat – repaying debts and interest with new loans – was cut from under it.
Faced with the certainty of bankruptcy, even capitalist analysts have been astonished at the persistent willingness of the Rajapaksas to pay debt repayments in a timely manner:
“They are demonstrating an amazing willingness to pay,” a senior analyst at one investment bank told the Financial Times. “But why they would want to, I’m a bit flabbergasted. They are bankrupt, pretty much. … They are wasting precious FX reserves. It’s just delaying the inevitable.”
Government adds fuel to the flames
The incompetent government of President Gotabaya Rajapaksa and his clique has certainly worsened the crisis. The present government came to power in elections in 2019 and 2020. It did so on the back of the terrorist attacks in Colombo in 2019.
They ousted the increasingly discredited traditional party of the Sri Lankan ruling class, the United National Party (UNP), on the basis of demagogic rhetoric about “saving the country”, “defending the Sinhala Buddhist people” and bringing the perpetrators of the bombing to justice. They played upon a fear of a return to the violence, bloodshed and civil war that existed in the country up until 2009.
This is @GotabayaR's regime throwing tear gas at a peaceful protest. They are trying to provoke the public.#lka #SriLsnka #EconomicCrisisLK #Protest #RegimeChange #GoHomeGota #පන්නමු pic.twitter.com/SOCJ7W21Sw— Prasad Welikumbura (@Welikumbura) March 31, 2022
When the Rajapaksas came to power, it was with the support of the majority of the Sri Lankan capitalist class, and they quickly rewarded the capitalists with massive tax cuts in 2019. The result was an overnight drop in government revenue of 33% … on the eve of the deepest crisis that Sri Lanka has suffered since independence!
And in the wake of the COVID-19 pandemic, this government has only further exacerbated problems. They have resorted to plugging the gap in government finances with massive printing of money. They printed Rs 1.2 trillion in 2021 alone – amounting to 12-15% of GDP – and they are on target to print even more this year. Massive fraud by the government in importing fertilisers have led to serious problems with the harvest in the last paddy season; and attempts to artificially peg foreign exchange rates has led to a boom in currency black markets.
As we have seen in so many countries around the world, the incompetence of the ruling clique is a product of the crisis of capitalism. But it can also become an accelerating factor in this crisis, and it is no wonder that the rage of the masses is directed at this clique. However, on the basis of capitalism there are no outcomes for the masses which do not entail harrowing suffering, even if the Rajapaksas are booted out.
The Sri Lankan government is now turning towards international creditors to come to its rescue. It now faces a whole new set of problems in seeking some sort of refinancing.
Sri Lanka is a playground for foreign capital. It is in debt to China, India and the West, and to pay off its debts the country has gifted important bits of its infrastructure to the different imperialist players on the island. In 2017, the UNP government gave away the strategically important Hambantota International Port to China on a 99-year lease. This port is on the southern coast of Sri Lanka, and therefore closer to international shipping channels than Colombo port. China has also taken ownership of the massive Port City development and Special Economic Zone (SEZ) in Colombo.
Meanwhile, in 2021 the Indian Adani Group bought a majority stake in a vital part of the Colombo Port immediately adjacent to China’s SEZ; whilst US capitalists took possession of the Yugadanavi Power Plant – the biggest power plant in the country.
The fact that the country is such a playground for so many big and competing capitalist interests to which the state is in debt now presents a problem. To whom is the government going to turn to bail them out? Whoever they turn to will demand that their capitalists are first in line for repayment following restructuring. This presents a dilemma for the Sri Lankan government, and explains their hesitancy in turning towards the IMF.
As the Financial Times commented in reference to the situation in Sri Lanka: “In Zambia, where authorities are restructuring debts of about $15bn to secure an IMF loan, the process has been beset by accusations from bondholders that the government was favouring Chinese creditors.”
However, they are in desperate straits, and have now turned to the IMF (i.e. US capital), India and China for bailouts.
None of these predatory capitalist gangs have the interests of the Sri Lankan people at heart. They have bled Sri Lanka dry, with the assistance of the different ruling cliques, for decades. Now they come in as “saviours”, but their services always come with strings attached, as we have seen before.
But an immediate concern of all of these gangs of capitalists is to stave off revolution. The same conditions that exist in Sri Lanka exist to one degree or another across the whole region. A revolutionary explosion in Sri Lanka would inspire the masses in India, Pakistan, Bangladesh and the broader region. The Indian government has already stepped in with a $1 billion loan. One of its considerations is precisely to forestall a social explosion. Even Bangladesh has stepped in with a $250 million loan from its foreign reserves, for precisely the same reason.
Political parties shell shocked
This social explosion has left all the political parties in a state of shock. None of them expected this elemental explosion of anger from the masses. The Janatha Vimukthi Peramuna (JVP), which has a reputation as a left-wing party on account of its past, has drawn massive attendance to its rallies in recent weeks. It is no wonder: the masses are desperately looking around for an alternative, and in those circumstances, swings are to be expected to formations on the left and the right.
Yet its focus is on the presidential elections… which are three years away. The masses cannot wait three years for a solution to their problems! What is needed is a revolutionary solution to the problems the masses face now.
In its programme, the JVP’s is extremely moderate. It does not seek to break with capitalism, which is at the root of the agony of the Sri Lankan masses. And given the acute nature of the present crisis, with the Rajapaksa clan increasingly discredited, some layers of the ruling class are even looking to this party to provide a safe outlet for the masses’ anger.
The trade unions too are failing to give an outlet to the anger of the masses. Had they been up to the tasks being posed by the current situation, they would call for an all out general strike to bring down the government; for the formation of committees in every factory and neighbourhood; and the fight would be on to bring down this government, to install a workers’ government, and to expropriate capitalism. The Sri Lankan revolution could become the beacon for the suffering masses across the South-Asian subcontinent and beyond.
Without an organised and conscious revolutionary leadership, however, the movement of the masses will be like steam without a piston box: it will build up, but over time it will dissipate without achieving any fundamental change. In France the Yellow Vests eventually receded. In Kazakhstan, the government called on the help of Russia to repress the movement. The present government will try to ride out the storm and wait until the masses tire and go home, and then they will move in with repression.
However, the crisis of capitalism will not go away. The underlying problems that have led to this movement will remain, and we will see repeated waves of such protests. The working class of Sri Lanka could provide the leadership the masses require, but all of the mass organisations – the trade unions in particular, but also forces like the JVP – are lagging far behind the situation. As a result, the majority have naturally turned away from the political parties in disgust. They feel represented by no one. And none of the parties understand this movement. None of them believed such a movement was possible. In this sense, the present movement in Sri Lanka has brought to light the real existing mood among the masses of downtrodden working people, a mood that exists to one degree or another in all countries.
What is needed is a leadership of a new type: a revolutionary party capable of giving the elemental movement of the masses an organised expression, and a programme based on replacing capitalism with a socialist plan of production.