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Ask HN: What is the future of the economy and government in Sri Lanka?

30 points by walrus01 ↗ HN
It looks like things have seriously gone into an economic freefall, with total lack of funds to pay for fuel imports and other essentials at the same time as a massive rise in global commodity prices. What does the future hold?

39 comments

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gsatic
As soon as a large enough tranche of cash flows in, the system will reboot. Its not Somalia where there are no institutions and things have to be built from scratch. There is enough cash in the world to make that happen. The chimp troupe will produce a great sound and light show for a few more months to decide the terms of the deal.
pstuart
I think China is buying it up.
throaghan
As a former resident of SL, it’s easy to point fingers at the ousted regime. Corrupt and made disastrous decisions for the economy, but there are far deeper problems.

The country’s politics revolves around weaponized Buddhist fundamentalism (the same flavour you see in Myanmar). For 70 years, it has just been politicians gaining by encouraging inter-ethnic conflict. The current regime was voted in based in strong anti-Muslim rhetoric. Soon, there will be another similar leadership. Until that changes, this country is no different than Afghanistan under the Taliban.

Tourism has been the saving grace, but the 2019 bombings and pandemic mean it will likely never recover. At some point, change has to come from within.

throwaway_4ever
Are many parts of the world simultaneously imploding more than usual or is it always like this?

In addition: Syria, Lebanon, Yemen, Venezuela, Libya, and Ukraine are all in extremely dire straits from a previously prosperous time.

ilaksh
I think the economic situation globally has been deteriorating for years. And the countries that are not as well connected to centers of power or favor or just were on rockier ground, disputed, etc. to start with suffer more obviously at first.
kingkongjaffa
Yes, also countries without a strong internal industry I.e capable of producing valuable exports, or at least access to valuable natural resources to exploit, are in particularly bad weather right now.

Over reliance on tourism without deep reserve wealth is a bad recipe when a pandemic grinds said tourism to a halt.

rmk
Pakistan looks to be next. There will likely be some debt renegotiation and a bailout, attached with some pretty onerous terms I'm sure. A possible bad path is if the US decides to make an example out of Sri Lanka because it went all in on China's debt trap diplomacy. Does Sri Lanka occupy a strategic location on the busiest sea lanes? If so, then there may be some competition between China and the Quad that may play out in an interesting way.
Namari
Well there is already a Chinese port there that is used for the Maritime silk road but I'm sure this is an opportunity for them to create more. I feel like it's too late already, Biden is weak and I don't think there is any win for them to get involve.
kayxspre
There is also a Mattala Airport at the south of the country, funded by loans from China. Yet, there hasn't been much use of it, and it pretty much lose its intended purpose. I used to visit Sri Lanka in 2013, with the outbound flight making a (virtual) stop (no disembarking) there, and when I look out of the window, there's nothing much that indicates the potential of the airport or the surrounding area, despite it being billed as "international" airport.
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Namari
hmm I wonder if it could be used for military purpose in the future.
realmod
> it went all in on China's debt trap diplomacy

No. Debt owed to China is less than 10% of Sri Lanka's total debt. And it owes a lot more to western nations/institutes.

I'm still shocked how this clearly unsubstantiated claim continues to circulate. The so called "China debt trap diplomacy" is a phenomenon mostly fabricated/promoted by columnists with a clear agenda.

rmk
A lot of the debt is not even disclosed, so your 10% number, particularly from a country such as Sri Lanka which has some extremely corrupt leaders, should be taken with a fistful of salt. America and Europe have stringent anti-corruption laws when dealing with both domestic and foreign entities. China has none of that, and in fact, it does not care or raise human rights or other ethics concerns when lending to countries (on questionable terms and often in secret with no transparency or accountability). To add to the opacity, China does not publish any details of such lending, whereas a lot of American and European lending is done through institutions that operate with a much higher level of transparency.
unmole
> A lot of the debt is not even disclosed

This is handwavy, conspiratorial nonsense. By what mechanism is sovereign debt concealed? How the fuck is the debt serviced if it is hidden?

rmk
Nothing of that sort. Repeated investigations of Chinese debt by different groups yield the recurring theme of confidentiality, very high interest rates over very compressed repayment periods that border on predatory, non participation in Paris Club (which exists to resolve debtor nations' problems in an orderly, reasonable manner), extensive use of cash collateral in offshore accounts... All of them very much against modern and international norms, and extremely secretive.

https://www.reuters.com/article/uk-china-emerging-debt/datab...

https://en.wikipedia.org/wiki/Paris_Club

rramadass
I am more interested in knowing how Sri Lanka arrived at this state; How does a country "collapse"? Where were the Economists and Finance Guys? Were the economic/banking systems really this brittle with no resilience are all? I would appreciate somebody knowledgeable do some explaining. I have browsed https://en.wikipedia.org/wiki/2019%E2%80%93present_Sri_Lanka... but still am not "getting" it.

That said, i think Sri Lanka is doomed for at least a decade simply because of their outstanding Debt.

kylehotchkiss
Overdependence on imports, specifically with no land routes to accommodate them. Tourism too large of a share in GDP didn’t help either.

The government also made some bad snap judgements like stopping their heavy fertilizer subsidies one day which wrecked crop outputs.

raxxorraxor
I think at that point they just didn't have any money left to import fertilizer. You can grow organic but not on soil that has been fertilized for years. The soil is completely dead and any water you pour into it will more or less vanish instantly. You probably need a decade or two to fertilize is naturally.

Of course you also need a lot more land as you need crop rotations and the soil needs time to regenerate.

ThePhysicist
From my understanding a large factor was the haphazard banning of imported fertilizer by the Sri Lankan Green party and the resulting drop in crop/produce yields (I think more than 50 % overall). Turns out that modern agriculture cannot just be dialed back to organic farming without significant losses in productivity. In my opinion a textbook example where ideology-driven politics clashes with the hard facts of modern engineering.
xupybd
Yeah we trash the soil with the way we use fertilizer. There is much we can do to be smarter about it. Often by using less but more expensive fertilizers. This is hard to do as you need to address the specific soil conditions. See https://www.bioagrinomics.com/visual-soil-assessment

Additionally, increasing organic material can really help.

Doing these things is however frowned upon by many who push the green agenda. Organic certification is difficult and not affordable for all. If there were a more pragmatic middle ground we could improve crop yields, drought tolerance and help the environment. Sadly not many push for the middle ground. It's all or nothing.

ThePhysicist
It's definitely possible, but I don't think you can do it in the span of several years.
bakuninsbart
This was at least partially a result of lack of currency reserve. Sri Lanka is reliant on those to import fertilizer and pesticides, and the idea of 'organic' farming was a convenient way to phrase 'we can't afford to buy on the international markets anymore'.
collyw
coming to the Netherlands next
unmole
Your understanding is incomplete. The ban on fertilizer imports itself was triggered by dwindling forex reserves. While it did make things worse, it's not the root cause or even the major factor.
an9n
Here's hoping they avoid death by IMF.
raxxorraxor
Either that or be entrapped by Chinese debt. But sure, there are similarities.
0xankit
they need better leadership. As of now i can see we will observe huge amount of terrorist activity.
ncmncm
This is being treated as a failure of organic farming by mainstream media. Dow Chemical and Monsanto (which technically doesn't exist anymore; "Bayer BASF" now, maybe) would really like us to think so, and Big Media is always happy to do their part.

But it was obviously really just massive government incompetence. It has been known for decades how to transition to organic methods successfully: incrementally, and with education. Both skipped.

After a sensible transition, yields could be lower, per acre, but not necessarily. Money spent on fertilizer and pesticides would be much lower than that. Money previously sent abroad would have stayed in Sri Lanka, milling around in the local economy generating prosperity.

Now they have chaos, and it will take a long time to get back to their previous, precarious state, probably in hock to China. Dow and BASF will get themselves well locked in; other countries will be spooked. A big success, for them. Not so for Sri Lankans.

flakyfilibuster
Thank you, I thought it was quite curious that the leading phase in the coverage was organic farming this and that - it is also rather difficult to find a different take on this. Are all news outlets sourcing their info from the same outlet when it comes to foreign affairs?
netsharc
If the media doesn't mention that the fertilizer ban was a "money saving" idea from one of the corrupt leaders, it's pretty myopic...
JohnHaugeland
No, there are dozens of sources

"Mainstream media" means that someone is trying to spread doubt, and knows very little from audited sources. It's an extreme red flag

ncmncm
"Extreme red flag" is an extreme red flag.
ngc248
Similar to how the switch from non-renewable to renewable sources of energy can't be done in a jiffy, the switch to organic from non-organic cant be done in a matter of years. The yields are too low with organic farming. This lead them to importing food, for which they obviously they need foreign reserves and so on the cycle.
ncmncm
> The yields are too low with organic farming.

Always repeated, never justified. Too low for what, exactly? Not too low to feed Sri Lankans. Maybe too low for that and also as much of export crops as had been needed to pay to import massive amounts of fertilizer and pesticide.

Importing food would be a much better use of foreign-trade money than importing pesticides.

JohnHaugeland
The second someone says "mainstream media," it's impossible to take them seriously
ncmncm
The second someone says,"The second someone says 'mainstream media', it's impossible to take them seriously," it's impossible to take them seriously.

But we already knew from the byline.

nisa
BBC had a good article explaining the causes: https://www.bbc.com/news/world-61028138

Government amassed huge amounts of debt in foreign currency for dubious projects. The forced switch to organic farming was a desperate measure to avoid loosing foreign currency and for sure didn't help but it was not the cause. This wasn't an planned movement to organic farming. They just couldn't pay for fertilizer.

Also pretty crazy that IMF still sings the same song: privatize your most important assets and reduce the public sector to create even more jobless people. Why just why do countries ask Putin and China for credit?

Not that they are any better: Also lot's of debt from China for white elephant infrastructure projects - which is a know strategy from them. So they couldn't pay and now China controls the port in Sri Lanka.

baremetal
The weakest dominos are falling first.

Soon it will be the stronger countries. Euro now at parity with the dollar, and the yen is imploding.

Saw this coming, bought farmland, learned skills. Hunkering down. If we get a global depression it will be worse than the last, because people lack the skills to grow their own food and fix things when they break.