- Geoff Bennett:The pandemic and global economic slowdown have increased pressure on developing economies.The number of countries at risk has doubled in the last eight years, mostly in the global South. The International Monetary Fund reports more than 50 countries, from Egypt to El Salvador to Pakistan, are in debt distress.Sri Lanka defaulted on its debt last year, and recently secured a $3 billion bailout from the IMF.Fred de Sam Lazaro traveled to the island nation of 23 million people off the southeast coast of India to see how the country is faring.
- Fred de Sam Lazaro:Before any reading, writing, or arithmetic, staff at the school near Sri Lanka’s capital, Colombo, have added a new ritual to the morning routine for many of the students.
- Thushara Pathirana, Principal (through translator):We have seen children faint and fall at morning assembly. When they come without having a good nutritious meal, we observed that they are not in a position to study.
- Fred de Sam Lazaro:I asked Principal Thushara Pathirana to query the students about what they had eaten before coming to school.A number in this group had not eaten anything. Most of the schools’ parents are day laborers who make money only when they work, those hardest hit by the pandemic in Sri Lanka’s crippling economic crisis. This school is fortunate to have a midday meal program three times a week funded under a program called Rise Up School Meals.Parents volunteer to prepare them. For some students, it is all they will eat this day. For many, a hard-boiled egg will be there only protein.Iromi Perera, Founder and Director, Colombo Urban Lab: We have never seen this level of malnutrition, hunger, food insecurity, inflation.
- Fred de Sam Lazaro:Colombo-based researcher and activist Iromi Perera says that’s even taking into account a decades-long civil war that ended in 2009 and the 2004 tsunami that killed more than 35,000 Sri Lankans.
- Iromi Perera:Up until COVID, these were communities who were able to fend for themselves. They were able to make ends meet, send their kids to school, build their houses incrementally over time.
- Fred de Sam Lazaro:Despite natural and manmade disasters over the past couple of decades, Sri Lanka has made significant progress in reducing poverty and improving people’s lives, the so-called social indicators. Education and health care are free to all citizens.And, in 2019, the World Bank upgraded Sri Lanka’s status to upper-middle-income country. Almost immediately after that, things began to unravel. An Easter Sunday terrorist attack on hotels and churches killed 261 people, dealing a blow to the island nation’s critical tourism industry, then the pandemic, which completely shuttered it.Meanwhile, the bills started coming due in what analyst Dhananath Fernando calls the manmade crises, mainly a credit-fueled infrastructure building binge.
- Dhananath Fernando, CEO, Advocata Institute:We had been borrowing money at very high interest rates at short maturity, in dollar terms, and investing in non-revenue-generating projects.
- Fred de Sam Lazaro:Among them, a new airport in 2013 in the hometown of the country’s then-President Mahinda Rajapaksa. It sits largely empty.In Colombo, a development called Port City was to be a thriving financial hub, part of China’s Belt and Road trade initiative. Twelve years after construction began, it sits virtually deserted. And the capital’s newest landmark, the $113 million Lotus Tower, also financed by China, was supposed to represent flourishing growth. Today, it serves mostly as a reminder of the ousted Rajapaksa family’s ties to Beijing and of endemic corruption says Fernando.
- Dhananath Fernando:Everyone in the political structure was getting benefited. This debt snowballed, because I borrow 100 rupees, $100 at 5 percent interest rate, and then I invest, I put money on something, and that doesn’t generate a cent. And then I have to pay 105 rupees on the next term.
- Fred de Sam Lazaro:It all came crashing down last year. The government defaulted on its debt. Food, medicine and fuel prices soared amid widespread shortages, pushing thousands of people into the streets and eventually into the halls of power.President Gotabaya Rajapaksa fled the country. He and his brother Mahinda had dominated Sri Lankan politics for 20 years.Nandalal Weerasinghe, Governor, Central Bank of Sri Lanka: It was kind of a Ponzi scheme.
- Fred de Sam Lazaro:A Ponzi scheme.
- Nandalal Weerasinghe:Ponzi scheme is, you borrow externally, and to repay that, again you borrow.
- Fred de Sam Lazaro:Nandalal Weerasinghe was recruited to return from a consulting career in Australia and take over Sri Lanka’s Central Bank.
- Nandalal Weerasinghe:And I had a fairly good understanding of what triggered the crisis, given previous two, three years, and also an — and an understanding of what needs to be done.
- Fred de Sam Lazaro:After China, Sri Lanka’s largest bilateral lender, agreed to restructure part of its debt, the International Monetary Fund agreed to a $2.9 billion bailout loan, with conditions.
- Nandalal Weerasinghe:Curtail government expenditure. Reallocate whatever resources for essential things.
- Fred de Sam Lazaro:The government has already raised income taxes and the cost of electricity, and more severe reforms are set to soon take effect under the IMF agreement, including anti-corruption laws.Iromi Perera says the consequences will be harshest on Sri Lanka’s poorest citizens, people who until recently harbored middle-class aspirations. She took us to meet Maxcy Jency, a mother of two young boys who lives with her husband in a tidy apartment built as part of a slum rehabilitation program.
- Maxcy Jency, Mother (through translator):The inside story is different to what you see.
- Fred de Sam Lazaro:The inside story is that they are broke, she says, since daily wage work is not steady. Their home loan and utility bills are months overdue.She showed me the bare cupboard in her kitchen, completely out of the bare essential, rice. On many days, she makes sure her boys have food.
- Maxcy Jency (through translator):I serve for them and, if there’s something leftover, I eat. If not, I sleep. I drink tea and sleep.
- Fred de Sam Lazaro:Like many parents, they hope for a better future for their sons. They have indulged their older son’s passion for the country’s most popular sport, investing in gear and tuition for a cricket academy.Someday, I will get your autograph, OK?
- Maxcy Jency (through translator):If we give them a good education, they won’t suffer like us.
- Fred de Sam Lazaro:Social activist Perera worries about spiraling despair amongst so many families like this one.
- Iromi Perera:You can’t pawn jewelry every month. You can’t sell an asset every month. So that’s the reality of the people that — the everyday person that you see on the street.
- Fred de Sam Lazaro:Including, by one report, some 1,500 doctors in just the first half of last year. They left for Western countries.Poorni Jayawickrama and husband, Rajeev Menon, are public health physicians in Colombo. They too feel the economic pinch.
- Dr. Poorni Jayawickrama, Physician:We never had to think twice for, like, grocery shopping. But now we have to think twice.
- Dr. Rajeev Menon, Physician:Every month, there is at least one doctor leaving — leaving the hospital from each unit.
- Fred de Sam Lazaro:To go abroad?
- Dr. Rajeev Menon:Yes, to go abroad.
- Fred de Sam Lazaro:They too have been recruited for jobs in Britain, a ticket to financial security. They have chosen to stay.
- Dr. Rajeev Menon:Something is due for citizens. And we believe that, during a problem, it’s — running away from the problem is not going to solve anything.
- Dr. Poorni Jayawickrama:We were schooling during the civil war, and we survived somehow. So, I think our child will do the same.
- Fred de Sam Lazaro:Sri Lankans will be counting on that kind of resilience for the tough times ahead, hoping for a turnaround in the economy and watched by dozens of other countries facing similar crippling debt.For the “PBS NewsHour,” this is Fred de Sam Lazaro in Colombo, Sri Lanka.
- Geoff Bennett:Fred’s reporting is a partnership with the Under-Told Stories Project at the University of St. Thomas in Minnesota.
Economic and Political Collapse
more than 50 countries are in debt distress
The pandemic and global economic slowdown has added huge stresses on developing economies, increasing their debts to foreign lenders to their highest in decades.
The number of countries at risk has doubled in the last eight years. One of those countries, Sri Lanka, defaulted on its debt last year triggering a political crisis as thousands of Sri Lankans took to the streets and ousted the political leadership. We report on how the government and 23 million Sri Lankans are faring.