Sri Lanka’s Economic Crisis Triggers an Exodus Towards India


Colombo/ Chennai: Sri Lanka’s dire economic conditions, sparked by the covid-19 pandemic, are pushing its citizens off the cliff, forcing them to flee to Indian shores clandestinely to escape food shortages.

On March 22, up to 16 Sri Lankan nationals, including eight children, reached Rameshwaram in the southern Indian state of Tamil Nadu in two batches on fishing boats. They hailed from Sri Lanka’s northern districts of Mannar and Jaffna. They were rescued by the Indian coast guard.

The six refugees in the first group told the police that they were forced to flee after struggling for food for several weeks. They claimed they paid around Rs 50,000 to fishermen who dropped them on the fourth island off Arichal Munai within Indian waters. According to them, many more families are finding ways to flee to India due to the acute shortage of food and fuel, and lack of income.

This, however, could only be the beginning. Intelligence officers in Tamil Nadu, the report said, have got information that “around 2,000 refugees” are likely to arrive over the next few weeks.

“Many people whom I know are planning to leave Sri Lanka, some have relatives in Indian camps, some have contacts in Tamil Nadu. There is panic and anxiety about tomorrow. It is almost certain that the price of rice will touch Rs (Sri Lankan) 500/ kg in another week. Today, it is Rs 290/kg of rice, Rs 290/kg of sugar and Rs 790 for 400 grams of milk powder,” V S Sivakaran, an activist based in Mannar said. The price of milk powder, for instance, jumped by Rs 250 over the last three days.

The meltdown highlights the poor policy response by the Sri Lankan government when its tourism sector took a beating due to the covid-19 pandemic two years ago.

State of the Sri Lankan economy

In 2020, the pandemic skewered tourism, one of Sri Lanka’s main foreign exchange-earners. This led to a dollar crisis in the Emerald Island.

Sri Lanka is heavily dependent on imports of essential items such as petroleum, food, paper, sugar, lentils, medicines, and transportation equipment. With the Central Bank of Sri Lanka’s foreign exchange reserves dwindling to around $2.3 billion (17,536 crore rupees) now—nearly half of what it was a year ago—the country has barely any money to pay for these imports or to service its external debt.

Sri Lanka’s dollar-denominated debt repayments due this year amount to more than $6 billion, including a sovereign bond of $1 billion maturing in July.

The government has had to cancel school examinations scheduled over the past weekend due to an acute shortage of printing paper. Its only fuel refinery ran out of crude oil in November 2021Nearly 1,000 bakeries across the country shut down due to the unavailability of cooking gas—some shifted to kerosene.

Consumer prices have risen by 15% in February, the fastest among 13 Asian economies.

India’s ties with Sri Lanka

India has, time and again, provided assistance on several fronts to its neighbour to tide over its economic crisis.

Since January, it has helped with $2.4 billion, including a $400-million currency swap and a $500-million loan deferment for two months. On March 17, Sri Lanka signed a $1-billion credit line with India for the procurement of food, medicines, and other essential items. A day earlier, President Gotabaya Rajapaksa had said that his government would work with the International Monetary Fund to tide over the crisis. Lanka has witnessed massive protests over shortages and steep prices, with thousands gathering on the main Galle Road in Colombo earlier this month, some even entering the President’s office.

However, Sri Lanka has also increasingly sided with China over the past few years, which is a threat to India.

(Soldiers guard a service station as people wait to get fuel in Colombo on March 23, 2022.)

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