Sri Lanka’s economic crisis in 2022 was one of the worst financial collapses in its history. The country faced extreme inflation, fuel and food shortages, and mounting foreign debt, which eventually triggered mass protests. The crisis escalated to a point where President Gotabaya Rajapaksa was forced to flee the country and resign. The political turmoil and economic disaster were deeply interconnected, exposing years of financial mismanagement and corruption. This article examines the root causes of the crisis, the events that led to Rajapaksa’s downfall, and the aftermath of his departure.
Causes of the Economic Collapse
The Sri Lankan economic crisis was not an overnight event. It was a result of multiple factors, including economic mismanagement, corruption, and global economic pressures. Some of the primary causes include:
1. Unsustainable Debt and Poor Financial Planning
Sri Lanka had accumulated massive foreign debt, particularly from Chinese infrastructure projects under the Belt and Road Initiative. The government borrowed heavily for projects such as the Hambantota Port and Colombo Port City, which failed to generate expected revenue. The country’s total foreign debt exceeded $50 billion, with nearly $7 billion in repayments due in 2022 alone.
2. Tax Cuts and Declining Revenue
In 2019, after Gotabaya Rajapaksa came to power, his administration implemented sweeping tax cuts that drastically reduced government revenue. This move was intended to stimulate economic growth but backfired, leading to budget deficits and lower credit ratings. The government struggled to finance essential imports, further worsening the economic situation.
3. COVID-19 Pandemic and Decline in Tourism
The COVID-19 pandemic devastated Sri Lanka’s tourism industry, which was a major source of foreign exchange. With travel restrictions in place, the country lost billions of dollars in revenue from tourism. Additionally, the decline in remittances from Sri Lankans working abroad further reduced the country’s foreign currency reserves.
4. Agricultural Crisis Due to Organic Farming Policy
In 2021, the Rajapaksa government abruptly banned chemical fertilizers, enforcing a shift to organic farming. While the policy aimed to promote sustainable agriculture, it led to a drastic drop in crop yields, particularly in tea and rice production. As a result, food shortages became rampant, and Sri Lanka had to import essentials, worsening the foreign currency crisis.
5. Rising Global Commodity Prices
The economic crisis was exacerbated by external factors, including rising oil and gas prices due to the Russia-Ukraine war. Sri Lanka, heavily reliant on fuel imports, struggled to afford essential commodities. Power cuts lasting up to 13 hours became common, further fueling public outrage.
The Rise of Mass Protests
By early 2022, Sri Lanka was experiencing severe shortages of fuel, medicine, and food. Inflation soared beyond 50%, and people could no longer afford basic necessities. Long queues for fuel and gas became a daily struggle, and public frustration reached a boiling point.
The protests began in March 2022, primarily organized through social media. Citizens gathered in Colombo and other major cities, demanding that the government take action to alleviate their suffering. The movement gained momentum, bringing together people from all walks of life—students, professionals, farmers, and even Buddhist monks.
The protesters initially called for economic reforms, but as the situation worsened, their demands escalated to the resignation of President Gotabaya Rajapaksa and his government. The movement, known as Aragalaya (struggle), turned into one of the largest demonstrations in Sri Lanka’s history.
The Storming of the Presidential Palace
The climax of the protests came on July 9, 2022, when thousands of demonstrators stormed the presidential palace in Colombo. Videos circulated worldwide showing protesters swimming in the president’s pool, occupying his luxurious residence, and discovering massive stockpiles of food inside.
Facing immense pressure, Rajapaksa fled the presidential residence and took refuge at a military base. Shortly after, he attempted to leave the country, but was initially prevented from doing so due to resistance from immigration officers. Eventually, on July 13, he managed to escape to the Maldives before traveling to Singapore.
Rajapaksa’s Resignation and Political Aftermath
While in exile, Gotabaya Rajapaksa sent his resignation via email, officially stepping down as president. This was an unprecedented event in Sri Lanka’s history. The government quickly appointed Prime Minister Ranil Wickremesinghe as the interim president, a move that was met with further protests since Wickremesinghe was seen as a close ally of the Rajapaksa family.
In the weeks following Rajapaksa’s resignation, Sri Lanka negotiated with the International Monetary Fund (IMF) for a bailout package to stabilize the economy. However, the damage had already been done. The crisis had severely impacted businesses, employment, and public trust in the government.
The Impact on Sri Lankan Society
The economic crisis had far-reaching consequences on everyday Sri Lankans. The country experienced:
- Unemployment and Business Closures – Many businesses shut down due to the lack of fuel and inflation, leaving thousands jobless.
- Mass Migration – With limited opportunities, many professionals sought to leave Sri Lanka in search of better economic prospects abroad.
- Food Insecurity – With high inflation and import restrictions, essential items like rice and milk became unaffordable for many families.
- Education Disruptions – Schools were forced to close frequently due to power outages and the inability to provide meals for students.
What’s Next for Sri Lanka?
The road to recovery for Sri Lanka remains uncertain. The IMF agreed to provide a $2.9 billion bailout, but the government must implement significant economic reforms to stabilize the situation. These include increasing tax revenues, restructuring foreign debt, and reducing reliance on imports.
Politically, the crisis weakened the Rajapaksa family’s grip on power, but questions remain about whether true systemic change will take place. Many Sri Lankans continue to demand accountability for years of corruption and mismanagement.
Conclusion
Sri Lanka’s economic crisis serves as a cautionary tale about financial mismanagement, corruption, and overreliance on foreign debt. What began as an economic downturn quickly spiraled into political upheaval, forcing a president to flee the country. While the protests succeeded in removing Gotabaya Rajapaksa, the nation still faces a long road to recovery. Moving forward, Sri Lanka must prioritize economic stability, transparency, and governance reforms to rebuild public trust and prevent future crises.
