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What the world learns from Sri Lanka's economic disaster

Sri Lanka, which is in the south of India, is based on agriculture and tourism. In these two sectors, the administration of former President Gotabaya Rajapaksa failed in economic strategies, which led the country to the biggest crisis in history. The popular uprising was so great that the presidential palace was invaded and Rajapaksa fled the country. This Thursday (14), he resigned through an email sent to Parliament.

A disaster for the country, which in recent years, it has had a large annual growth in GDP. In 2015, for example, the increase was 5%. To make a comparison, the United States, the world’s largest economy, grew by 5.7% of GDP last year.

Disastrous environmental program

In agriculture, an unprecedented environmental experiment was primarily responsible for the economic crisis experienced by the Sinhalese. To make the country the first in the world to have fully organic agriculture, the government banned the import and use of synthetic fertilizers and pesticides and ordered that domestic production be made exclusively of organic products within a maximum period of 10 years.

“This total exclusion of pesticides, with the removal of agronomists and scientists, focusing on 100 % in organic agriculture was disastrous”, emphasizes Igor Lucena, economist and PhD in International Relations.

“This reduced productivity and left the country at the mercy of pests and risks to agricultural companies. It was an erroneous ideology with serious consequences and it serves as an example for other countries”, adds Lucena. For him, it is evident that a totally organic agriculture is not sustainable. “There are niches that can work with this segment, but a country cannot be at the mercy of ideologies”, he emphasizes.

In an interview with Gazeta do Povo, Daniele Siqueira, a market analyst at AgRural, also criticized the sudden, illogical and irresponsible imposition of the new model on an entire country. “Organic agriculture requires knowledge, resources, technology and skilled labor, and is not yet ready to serve entire populations, especially in poorer countries like Sri Lanka,” explained Siqueira.

Pandemic and fall in tourism

In addition to poor management in agriculture, Rajapaksa did not know how to get around the difficulties economic consequences resulting from the pandemic, which substantially interfered in the tourism sector, which represents 5% of the country’s GDP. In addition to the natural beauty of the beaches, the country used to receive a large number of Buddhists on religious trips, about 2 million a year.

At this point, Lucena points out another flaw of the former president, who serves as example to the world: “A country cannot have a loose monetary policy, letting the negative international elements interfere to the point of politically destabilizing it. There have to be other plans.”

With closed doors to the world

In recent decades, Sri Lanka has also failed to close itself to the domestic market, without valuing imports and exports. This hampered the capture of foreign exchange.

The Central Bank has no international reserves and the country is unable to import fuel, food and medicine. The current account deficit of Sri Lanka has been, in recent years, above 3 billion dollars, a high value for a country of 22 million inhabitants in Southeast Asia.

“Thus, there is an inflationary explosion, because there are no international competitors and products are scarce”, explains Lucena. “Sri Lanka shows the world that a country’s economic policies cannot depart from export work and greater productive capacity”, points out the specialist.

Due to these failures, the Sri Lanka will need immediate international assistance of at least 50 billions of dollars from the World Bank and the International Monetary Fund. It is also possible that the United Nations will need to interfere with peacekeeping and security forces, as there is a risk of civil wars and the end of the country’s political organization.

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