The Hopeless State

 When a country becomes bankrupt, we have a tendency to think of this as being a technical thing ....  

Tuk Tuk- Look At Those Fuel Queues

 

.... that the country will continue much as before, until a rescue package from the International Monetary Fund can be organised or a new budget imposes taxes that get the country limping forward again.

But in the case of an island like Sri Lanka, this was simply not the case. Its now agreed that the islands political and financial elites had and have failed to invest in the public structures, such as transport and a diversified economy since independence, and had left the countries lower-middle and working classes to bear the brunt of the inevitable economic collapse.

A finger is pointed at the sweeping tax cuts of 2019 - lobbied for by many corporate and elite professional groups - which effectively emptied the state coffers, as tax revenues from the wealthy and big businesses were irreplaceable.

Bankruptcy for that island state meant that:

• With little or no petrol/diesel/kerosene arriving, transport and even basic cooking was a problem. Trees were being cut down for wood to burn.
• The majority of Sri Lankan children were left subsisting on a diet with almost no protein ... with potential long term consequences for brain, bone and physical development.
• There was no supply of milk powder, most of which was imported, for babies.
• The public hospitals had run out of many drugs such as snake bite anti-venoms, whilst the private health sector did manage to continue it was only by charging more (but 80 per cent of the population couldn't afford this care in any event).
• Even bicycles were suddenly too expensive for many to buy.
• Schools were shut, and classes were on-line for the third year running - but power cuts made even that availability haphazard.
• Many more Sri Lankan's were being pushed to work overseas as housemaids, drivers and mechanics in the Middle East, with their remittances helping to ease the foreign currency crisis, as emigrants continue to send their earnings home.

All dissent at this state of affairs was being met with brutal violence from the police and military, and the desperation led to hopelessness, with suicides rising. One mother simply threw herself and her two children into a river as she couldn't feed them.  The country's economic crisis in 2022 was primarily driven by the build-up of an unsustainable national debt, depleted central bank reserves, and gross macroeconomic mismanagement.

• A year or so later, Sri Lanka had managed to renegotiate its debts to Chinese Banks (but the terms are secret). 
• The massive street protests which toppled the government have stopped, and calm or resignation seems to have returned to Sri Lanka. 
• The long queues for fuel are gone, and 
• Shortages in food and medicine have eased. 
• The government has been forced to make tough choices to get the economy back on track.
• Sri Lanka's economy is expected to grow in 2024 (with estimates of between 1.9% - to 4.4%).
• Poverty and income inequality remain as grave concerns. The country's economic outlook is improving, but continued reforms are needed to any increase growth potential.
• Poverty is expected to decline gradually, but remain above 20% until 2026, with the figures of 24.8% of the population still classed as in poverty, as of July 2024.
  

And that's what a state bankruptcy really means when you see the term used .....