The economic crisis in Sri Lanka is most notable for how foreseeably it will occur.
Many citizens started to understand that there would eventually be a reckoning more than a year ago. They started to fortify themselves, some for financial gain and others just to survive.
Dhananath Fernando, COO of Advocata, an economics-focused research tank based in Colombo, said: “That there would be a catastrophe was evident since at least November 2020.” Since 2020, economists have been warning about the debt disaster.
The Sri Lankans who got the crisis right
Saliya Gunasinghe stated, “I started acquiring substantial rupee-denominated debts in 2021. “I make money working for a foreign company. I was able to obtain a loan in rupees with a fair interest rate. In preparation for the rupee’s value to plummet, I obtained loans and made real estate purchases.
The dollar was worth 200 Sri Lankan rupees when he purchased his property; today, it is almost worth 370.
“My repayments have nearly halved in value, and I expect that they will continue to decline. Gunasinghe said, “I might get my apartment for next to nothing.
Like Gunasinghe, many people were preparing for the worst by the end of 2020.
For instance, there was a lot of interest in the bitcoin industry.
“People witnessed the central bank’s struggle to uphold a fictitious currency peg.
According to Prashan Loganathan, an avid cryptocurrency dealer based in Negombo, a city on the western coast of the island nation, many people began transferring their cash savings to stable coins like USD-T when they realized it would crash.
“Those that converted at the rate provided a year ago are at ease.
Those who weren’t sorry.
Commodities were another arena. In 2021, merchants began to hoard stuff like sugar, flour, and cooking gas cylinders. “We bought these cylinders for 2,500 (Lankan rupees), but we are selling for a 4x-5x profit,” says Saman, a black-market operative who declined to give his surname.
For others, though, it was more a matter of survival.
Take Rosie Wijesinghe, for instance. A homemaker residing in Colombo’s affluent Colpetty neighbourhood where power supply is “usually very reliable,” she let her son persuade her into buying a power generator in 2021. She also got some solar cells installed.
By this March, many parts of the country were experiencing power outages, some reportedly up to 13 hours long every day.
Nevertheless, for every household relatively prepared for the crisis, there were several that weren’t. The worst of this lot seems to have been the Sri Lankan government itself.
A Sri Lankan government that is completely unprepared
For many years, Sri Lanka has had substantial trade imbalances. The years after 2020 were predicted to experience significant levels of debt-servicing as the obligations matured. The government was supposed to pay back 90% of the money it spent on its total budget in 2022.
The reality of a default was something the government refused to recognize. then made a number of policy decisions that worsened the situation even worse,” said economist and University of Colombo lecturer Umesh Moramudali.
As a result, governmental inventories of essentials like coal, grain, and fuel have been totally insufficient to address the problem. Negotiations to restructure the nation’s obviously unsustainable debt started extremely late in the process.
With no means to import further goods, once upper middle-income Sri Lanka is, by now, dependent on handouts from neighbours.