By Shuvaloy Majumda and Vijay Sappani
Sri Lanka is in deep turmoil; understanding this crisis is crucial for Canada’s wider interests in the Indo-Pacific.
Prior to the upheaval, Sri Lanka had a thriving economy, among the best human development index scores in South Asia, and wide-ranging trade and preferential market agreements throughout the region and world. With access to global markets, many sectors — notably tea, agriculture, apparel, manufacturing, shipping, and tourism — had expanded. Its economy was strong, growing, and supporting development and prosperity for all.
But these brighter days gave way to troubling warning signs. Sri Lankan politicians were warned as early as 2015 about the risks of an evolving economic crisis.
Reckless spending and ill-considered tax cuts contributed to a monstrous deficit. The 2019 Easter Sunday terror attacks and the pandemic both decimated tourism, Sri Lanka’s third largest source of foreign exchange. The government pursued a notorious, UN-led ideological ban on fertilizers and mandated organic farming, which dramatically deteriorated agricultural productivity.
Sri Lanka now faces its worst sovereign debt and economic crisis since its independence in 1948. It has significant shortages of food, fuel, medicines, and other essentials, with global inflation exacerbating these challenges.
Coupled with this economic crisis is a geopolitical one driven by China. In 2019, Sri Lanka was obliged to lease its Hambantota port, and thus part of its sovereignty, to China for 99 years under the predatory debt schemes of Beijing’s Belt and Road Initiative.
Unsurprisingly, this “commercial” Chinese port received a military PRC surveillance vessel, which has capacity to monitor QUAD submarine and satellite activities despite Indian protestations.
Thus, rebuilding Sri Lanka and countering China go hand in hand. Sri Lanka constitutes a strategic marine theatre, with Beijing seeking to use the country as part of a broader strategy to secure its interests.
And as home to the largest Sri Lankan diaspora in the world, comprising many Tamils who came as refugees, Canada also carries a moral responsibility for Sri Lanka’s well-being.
So, what is needed to help restore Sri Lanka?