Home > News > Covid, Climate, Chemicals and Debt: The Perfect Storm that hit Sri Lanka

By Dr Vandana Shiva

Sri Lanka, Serendip, the jewel in the Indian Ocean is facing a severe political and economic crisis.

The crisis has multiple roots but has intensified in the last 2 years with Covid, Climate change, the debt crisis, the contribution of chemical fertilisers to debt, climate emissions and climate vulnerability.

The protests we are witnessing now are triggered by an economy of greed, creation of a debt trap and rent collection, rising costs of living and ordinary citizens facing an economic crisis of survival. Such protests  were common sights across the world in 2019 before Covid and the lock down. Recall Beirut and Chile. When the cost of living becomes unbearable, people rise. And across the world countries are being trapped in debt to generate billions for the billionaires and banks.

Sri Lanka is facing a serious debt and foreign exchange crisis. This is a direct result of the Neo liberal policies of corporate globalisation that make countries borrow more and more for the Infrastructure of Profits -ports, power plants, highways, resorts – end up in a debt trap, and are forced to pay more for essentials.

Sri Lanka’s foreign debt is at $12.55 billion with the Asian Development Bank, Japan and China among the  major lenders.

My mind goes Susan George’s book A Fate Worse than Debt.

Over the last decade China has lent Sri Lanka more than $5 billion for the construction of highways, ports, an airport and a coal power plant.

47% of Sri Lanka’s external debt stock is owed to international capital markets, 22% is held by multilateral development banks, followed by Japan having 10% of Sri Lankan external debt.

China accounted for 30% of all Foreign Direct Investment (FDI) in big projects in Sri Lanka from 2012-16.

According to Gateway House Chinese debt and equity are funding more than 50 projects worth more than $11 billion. Most are roads and water treatment plants, but the largest projects are the Hambantota Port, the Colombo Port City and the Lakavijaya thermal power plant – all three funded by Chinese government-owned banks and being built by Chinese contractors.

As Amit Bhandari and Chandni Jindal of  Gateway House write:

“During 2017, Sri Lanka’s government spent 83% of its revenues on debt repayment, a quarter of which was for foreign borrowings. The country’s external debt repayments are projected to double from $2.1 billion in 2017 to $3.3-$4.2 billion annually from 2019-22. It is not surprising that Sri Lanka chose to convert some of this debt into equity and hand over Hambantota to China Port Holding in 2017”.

In February 2022, the country had only $2.31 in foreign exchange reserves, too little to cover its import costs and debt repayment obligations of $ 4 billion.

A foreign exchange crisis has led to the inability of the government to pay for imports of essential Commodities including fuel. The dependence on fossil fuel imports has led to an economic crisis, with power cuts of up to 13 hours and galloping inflation after the currency was devalued.

The 22 million citizens of Sri Lanka are facing a crisis of survival, and have risen in protest against the government. Ministers  have resigned. Emergency rule has been declared. The country is surviving on credit.

Sri Lanka’s capacity to pay back its loans with interests was badly hit with COVID. Covid aggravated the crisis.Tourism and foreign workers remittances was one of Sri Lanka’s main foreign exchange earners. The pandemic dried up both.  Foreign exchange reserves plummeted by almost 70 percent in two years.

In 2019, contribution of travel and tourism to GDP (% of GDP) for Sri Lanka was 12.6 %. Contribution of travel and tourism to GDP (% of GDP) of Sri Lanka increased from 6 % in 2000 to 12.6 % in 2019 growing at an average annual rate of 4.28%.

Tourism which had increased from 6% in 2000 to 12.9 % in 2019, collapsed by 70.8% due to Covid.

The Ukraine crisis has further amplified the crisis with oil prices and fertiliser prices rising. Sri Lanka has turned to the IMF, India and China for credit. The devaluation of the Sri Lankan currency was part of the IMF restructuring demand.

In February, India sent diesel shipments under a $500 million credit line. Sri Lanka and India have signed a $2  billion credit line for importing essentials, including food and medicine.

China provided the Central Bank of Sri Lanka  with a $1.5 billion swap and a $1.3 billion syndicated loan to the government. China is considering offering the island nation a $1.5 billion credit facility and a separate loan of up to $1 billion. 

Climate havoc which affects South Asia most severely has also intensified Sri Lanka’s food crisis.

South Asia is economically and ecologically rich due to monsoons. Climate Change is severely impacting the monsoons, and with it agricultural production. According to the latest IPCC report, for every 1% increase in temperature,intense and extreme events related to  South Asian monsoon will increase by 7%.

Since 2009  my writings like Soil not Oil written for the Copenhagen Climate Summit showed that a commodity-based fossil fuel intensive, chemical intensive, capital intensive agriculture and food system has contributed 50% of the greenhouse gas emissions that are causing climate havoc and threatening agriculture

11-15% from Agricultural production,

15-18% from deforestation,

15-20% from processing and long distance transport through global supply chains,

2-4% waste.

We cannot address climate change, and its very real consequences, without recognising the central role of the industrial and globalised food system, which contributes more than 50% to greenhouse gas emissions through deforestation, animals in concentrated animal feeding operations (CAFOs), plastics and aluminum packaging, long distance transport and food waste.

“Food and climate impacts go both ways. Climate change creates significant risks to the food system, with rising temperatures and changing weather patterns threatening enormous damage to crops, supply chains and livelihoods in the decades ahead”.[1] [2]

Unstable weather has contributed to the Sri Lankan crisis.

A study published on “Climate change and food security in Sri Lanka: towards food sovereignty” published in Nature argues that promoting food sovereignty could be the key to alleviating  impacts.of Climate Change.

Synthetic chemical fertilisers emit nitrous oxide which is 300 times more damaging to the climate than CO2. Imports of synthetic fertilisers were also a big drain on Sri Lanka’s scarce foreign exchange reserves.

The Ukraine war is making it worse. Fertliser, fuel and food prices are rising everywhere. The Poison Cartel which gains from selling costly fertilisers are using the crises to undo all the steps countries have taken to create agriculture policies which are free of fossil fuels, fossil fuel based chemicals, are resilient to climate change of which 50% contributions come from  the industrial, globalised food system which is also more vulnerable to Climate Change.

In Europe the chemical industry is trying to undo the Farm to Fork policies.

They are portraying the Sri  Lankan crisis as related to a  few months’ stop in import of chemical fertilisers in April 2021. The ban was due to Sri Lanka’s debt crisis. A ban on imports does not automatically translate into policies for Food Sovereignty. Food sovereignty requires transition to ecological agriculture, in practice, in research and in policy. Cuba managed the fuel and fertiliser crisis triggered by the collapse of the Soviet Union through a transition of Organic Agriculture supported by policy and research.

Covid, Climate and Chemicals have created a perfect storm in Sri Lanka. The storm could impact any country that is being recolonised by a debt trap. Reclaiming economic sovereignty, beginning with food sovereignty, are the solution to pandemics, climate resilience, freedom from debt, fossil fuels, and chemicals.

The Sri Lanka crisis makes visible the high costs of Covid born by citizens, while billionaires walked away richer by $1.5 trillion.

Sri Lanka makes visible the high costs of Climate Injustice.

It also makes visible the high costs of dependence on foreign investments and borrowing to build costly infrastructure that benefits a few, while most citizens pay a very high price through the destruction of the infrastructure of Life – both the ecological infrastructure of a stable climate, and the economic infrastructure of a guarantee of basic needs.

Localisation instead of corporate globalisation, ecological sustainability and sovereignty instead of fossil fuel intensive, capital intensive, debt intensive economies are the path to peace and freedom, resilience and self reliance  – for individuals, communities, countries and the planet.


Ref.

[1] C. Mbow et al., “Food Security,” in Climate Change and Land (IPCC, 2019), https://www.ipcc.ch/srccl/chapter/chapter-5/.

[2] Sandalow D. et al., Food and Climate Change InfoGuide, Columbia SIPA – Center on Global Energy Policy, May 2021, https://www.energypolicy.columbia.edu/research/article/food-and-climate-change-infoguide.


Thumbnail image: «View of central highlands of Sri Lanka » by Satheesha J., licensed under the Creative Commons Attribution-Share Alike 4.0 International license.

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