Why Sri Lankans had to rise in revolt

What does it take to infuriate people of South Asia’s wealthiest country to storm the palace of a serving president? The same day they set on fire the private residence of the country’s prime minister? And this happens to a democratically-elected president and prime minister?Among the many reasons behind such lingering crises and uprisings, we found the following four that have driven Sri Lankans to go from street fight to palace capture: medium92810763During the past one year, average prices in Lanka have been doubling every two months making it impossible for people to live within their income. The inflation rate in the capital city of Colombo has been even worse, rising from 5.4% last year to 54% in May this year — an increase of 10 times in 12 months. medium92810353 medium92810767While inflation is eating away Lankan rupee’s value domestically, the near-collapse in the currency value in the past few months has made imports prohibitively expensive – just at a time when the country needs to import heavily, everything from oil to food. Measured by loss of value against the dollar, the Lankan rupee has been the worst-performing currency in the world in the past two weeks. medium92807811One benefit of a weak currency was the dramatic increase in tourism: medium92807836But this was undone by an equally dramatic fall in remittances – foreign exchange sent by the Lankans living abroad: medium92807872What happened as a result of exchange-rate depreciation is only one example of how every attempted solution turns out to be a new problem when a crisis goes as deep as it has gone in Lanka today. Here is more evidence of it. medium92810782The now-disgraced Rajapaksas had come to power promising to cut tax rates. In a democracy politicians often make unreasonable promises, but most don’t go on to commit the second mistake of fulfilling those promises. President Gotabaya Rajapaksa (along with his six other family members that almost captured the government starting 2019) went ahead with implementing the poll promise.In November 2019 VAT rate was cut from 15% to 8%. Some taxes were abolished. Mistakes and misfortune combined to turn the slashing of taxes into an unmitigated disaster. Covid spread across the world starting early 2020 pushing the world — and Lanka — into an economic catastrophe. When the rest of the world recovered, Lanka couldn’t. In fact, it slipped further into crisis. Between 2019 and 2021, 10 lakh people stopped paying taxes. Tax-GDP ratio fell to its lowest-ever level and the government had no money to revive the economy. medium92807885Today, Lanka is spending 2.4 times more than its income. As a result, its credit rating has collapsed and lenders are unwilling to lend moneyA recent report by the finance ministry of Sri Lanka put out these alarming figures: medium92807895The government’s budget deficit has risen from 5.4% of GDP in 2018 to 12.3% of GDP in 2021. And while 40% of the deficit in 2018 could be funded through foreign borrowing, today 100% of the deficit has to be funded domestically. medium92810795Democracy has a way of turning politicians into dictator-like. After their massive victory in the last election, not one or two or three – seven members of the Rajapaksa family became part of the government. They occupied the posts of president, prime minister, and ministers with key portfolios.The protests have nearly dismantled the Rajapaksa political dynasty that has ruled the island country for most of the past two decades. medium92810416This week, thousands of protestors stormed the Presidential Palace in Colombo, finally ousting Gotabaya from power. All others from the family have quit the government one by one this year. The last to go was Basil Rajapaksa (Gotabaya's youngest brother), who resigned as the finance minister in June.The removal of the Rajapaksas from public office was one of the main demands of the months-long protests over the economic crisis.No wonder people now blame the family for all their woes and fear that nothing short of a popular – and so far peaceful – revolt will force the Rajapaksas to leave the government. Including the taxpayer-funded palaces.92806414