he Sri Lankan crisis is getting worse. Fast depleting foreign reserves, kilometres-long queues for petrol, diesel, cooking gas, milk powder and even medicines, and the latest to take the hit is the tourism sector, courtesy of the Russian invasion in Ukraine.
Once booming, the Sri Lankan tourism sector, which has seen its worst days since 2019 because of Easter Bombings and Covid-19 lockdowns, has now become collateral damage of the war in faraway Europe.
Sri Lanka, which is facing the worst economic crisis in its modern history, recently lifted most of the restrictions on foreign tourists to boost the tourism sector and to earn some much-needed foreign currency.
According to the Lanka Tourism Board, around 25% of the foreign tourists currently in the island nation are from Russia and Ukraine. With the West tightening the screws on Russian economy, stranded Russian tourists have run out of money. Their debit and credit cards have become inactive causing huge hardship. Since all flights back home are cancelled, Ukrainian tourists have also been stranded with the Russians.
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The Sri Lankan government has already extended their visa for two more months keeping the deteriorating situation in mind. Tourism minister Prasanna Ranatunga said that despite the huge economic crisis, Sri Lanka has decided to look after thousands of Russian and Ukrainian tourists stuck on the island.
Many luxury hotels and resorts owners have also come forward to look after them. “Tourism is completely ravaged and we were hoping to make some money. Because of the war, these well-to-do people have now become paupers. We are now being forced to help them. It is an irony,” said a hotel owner from Colombo.
The war has slammed the brakes on the arrival of tourists from the rest of Europe and America. The Westerners, worried about the war spilling over to their countries, have cancelled bookings, compounding the crisis.
Sri Lanka exports tea to Russia and Ukraine. That has also taken a big hit in the last two weeks.
Sri Lankan tourism is a $5 billion industry, which employs around 3 million people (roughly 15% of entire island nation’s population).
The back-to-back lockdowns have ruined the once-thriving economy. The banks have run out of foreign reserves and no bank is issuing Letter of Credit (LOC) endangering the heavily import-based economy. The Central Bank of Sri Lanka (CBSL) has fixed the exchange rate at LKR 200 per US dollar, but it is trading at LKR 275 in the black market.
“Because of the huge gap between official exchange rate and the black market rate, most foreign remittances are taking place via hawala routes, further eroding the foreign reserves in the country. No one is using banks for foreign transactions. The situation is so bad that even the three-wheeler drivers have become hawala agents. If the same situation continues, Sri Lankan Rupee will soon become worthless,” said a Dubai-based Sri Lankan businessman on condition of anonymity.
The beleaguered government maintains that the CBSL has around $2.5 billion forex. But unofficial sources claim it is less than $800 million. Sri Lanka needs $500 million to import oil every month. Acute shortage of forex has also hit oil, gas and power sector. With no dollars to pay for these essentials, fuel pumps are going dry. The shortage of cooking gas has hit the country hard, forcing the villagers and lower class to use firewood to cook food.
It is summer and the water level at the hydro electrical dams are fast depleting forcing the electricity board to go for 7-8 hour power cuts every day. With no money to buy coal and diesel to power the power plants, electricity crisis is likely to get worse during peak summer months of April and May.
Many pharmacies have run out of life-saving and essential drugs as the importers don’t have dollars to buy them from abroad. “The situation is so bad. There are no paracetamol tablets in the pharmacies,” said a Colombo resident.
India, the closest neighbour, has already given over $2.5 billion to tide over the crisis and has also sent petroleum products. China has already extended more monetary assistance.
The panicked government is holding a series of talks with Gulf nations for a bailout. Sri Lankan President Gotabaya Rajapaksa has already held a talk with the Crown Prince of Abu Dhabi seeking immediate help.
Meanwhile, finance minister Basil Rajapaksa has put off his scheduled visit to New Delhi to discuss a bailout for unknown reasons.
President Gotabaya who is under fire for mishandling the economic affairs of the country, creating a Latin America-like situation, has dismissed two of his cabinet ministers for speaking out against his government.
One of the sacked ministers, Udaya Gammanpila, has described Basil Rajapaksa as an “ugly American”. He has demanded that he should take full responsibility for the economic crisis the country is facing.
Addressing the media, he said that “an American citizen” (Basil) was deciding the fate of the country and said he would reveal who has pushed the island to the brink of economic collapse.
“I will reveal all facts with written proof as to who put the country into this turmoil. This is an intentional conspiracy. The country was taken to a situation Indonesia had to face in 1997,” he said.
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