As Sri Lanka struggles with outstanding foreign debt, rural households across the country have been living off borrowings after exhausting their savings. Meera Srinivasan reports on how those already struggling with severe economic hardships are now grappling with a pandemic-induced crisis
After doing seven jobs in the last three years in and around Colombo, Simran Enric is now back home in Sri Lanka’s hill country. He escaped the pandemic that struck the capital, but his last job at a grocery store didn’t.
“I am ready to take up any job. It doesn’t matter which city, what work or how much they pay,” says the 19-year-old. He began working after dropping out of school before his Ordinary Level examination. His parents’ stagnant wages, from tea production on an estate in Maskeliya in the central Nuwara Eliya district, was not enough for three square meals for their family of five, including Enric’s two schoolgoing sisters. His Colombo income, they hoped, would support household finances. It barely did, but the family couldn’t afford to lose any additional source of income, however meagre, as they tried to cope. Over a period of time, Enric’s small savings proved valuable. And then the deadly virus arrived.
In Sri Lanka, though, the novel coronavirus didn’t seem all that deadly, going by the official data. While COVID-19 case numbers in the region and in powerful western countries increased rapidly, Sri Lanka stood out, drawing high praise, including from the World Health Organization, for containing the virus. To date, Sri Lanka has reported 11 deaths and fewer than 3,000 cases, of which only 127 are active.
After a stringent lockdown for two months and the efforts of the country’s efficient public health sector, aided by the military, Sri Lanka felt relatively fit to hold the twice-postponed parliamentary elections on August 5. Over 16 million of the country’s 21 million-strong population could vote in the elections, held with elaborate health guidelines mandated by the Election Commission. The turnout was 71%.
As was widely predicted, the ruling Rajapaksa brothers’ young party won comfortably, securing a rare two-thirds majority in Sri Lanka’s proportional representation system. With carefully cultivated political capital from projecting their war-victor image for a decade now, and aided by the former government’s abysmal failures, the Rajapaksas have consolidated their grip on the country like few have. President Gotabaya Rajapaksa and his older brother Prime Minister Mahinda Rajapaksa sit in the country’s two most powerful offices. They have no imminent threat to their political might. But their government faces an unprecedented economic challenge.
Reeling under the shock of last year’s ghastly Easter terror bombings, Sri Lanka’s economy contracted by 1.6% in the first quarter of 2020, even before the pandemic’s local and global spread was clear. The World Bank has projected a rather grim picture, warning it could contract up to 3%.
Of the country’s mounting external debt – equivalent to 42.6 % of the GDP in 2019, according to the Central Bank of Sri Lanka – nearly $3 billion is due for repayment this year. This includes a non-negotiable $1 billion sovereign bond maturing in October, besides bilateral and multilateral loans.
Aware of the daunting task ahead, the Rajapaksa administration wasted no time in requesting lenders for a debt freeze. On his visit to New Delhi in February, his first trip abroad after assuming premiership of the then-caretaker government, Prime Minister Mahinda Rajapaksa sought a debt moratorium that is still being negotiated.
With the pandemic that hit Sri Lanka in March amplifying the economic crisis manyfold, the country’s looming debt crunch gave the government the jitters. The government went for new loans to service past borrowings, including over $5 billion from China and $960 million from India. In March, Sri Lanka signed an agreement with China for another $500 million loan after an “urgent request” from Colombo, to deal with the pandemic’s harsh economic blow.
Along the margins
While the government struggles to cope with the fiscal crisis, the people, especially those on the margins, suffer.
Enric stayed in Colombo for almost eight weeks during “curfew time” with a partial salary, lodging and food, until he lost his job. “There was no chance of finding a new job,” he says. He returned home and the family was back to relying entirely on his parents’ wages.
“No work today; there aren’t enough tea leaves on the bushes after last week’s heavy rains,” says his mother S. Bagyalakshmi, who recently pawned the only piece of jewellery she had kept for her daughters. “Work has been irregular these days.”
In Sri Lanka, a people living off borrowed money
Increasingly, many employers across estates are asking workers to stay at home once every few days, so they don’t have to pay the monthly incentive tied to a minimum number of days’ mandatory work, according to labourers. Citing the pandemic, Sri Lanka’s major plantation companies have virtually stalled talks with the government on a basic wage hike from the current LKR 700 to LKR 1,000 that workers have been demanding for over three years. Not that the companies were any more willing to pay the rate in 2019, when tea exporters reported a record high revenue of over $1.3 billion.
The estate workers were persistent enough to push their demand to poll manifestos, but not powerful enough to realise it. In January this year, two months into office, President Gotabaya Rajapaksa assured them of a wage hike by March 1, following up on his campaign slogan. Six months later, workers have resigned to yet another broken promise.
For those like Bagyalakshmi, pawning her hard-earned piece of jewellery was the only option to survive. As far as her family’s poverty goes, it was not introduced by the pandemic, but was gravely aggravated by it.
The nearly 1.5 lakh estate labourers among Sri Lanka’s million-strong Malayaha Tamils (hill country Tamils), whom British planters brought down from south India to clear forested mountainous land, plant and pluck coffee and later tea, have been historically neglected. Earners of precious foreign exchange, they remain on the country’s geographic, social and economic margins, their labour invisible and voice rarely heard.
Bagyalakshmi’s home, a colonial-era ‘line room’ with a living area barely 8X8 feet, is located on the edge of a winding, unmotorable road inside an estate. It is a silent witness to the violent colonial past her ancestors endured, as well as the exploitation that carried over into the years after Independence, making the lives of successive generations vulnerable and their livelihoods, precarious.
But it is not just estate workers facing the brunt. Like Enric, tens of thousands of Malayaha Tamil youth, employed in hotels and shops, often as cleaners or assistants, in Colombo and other cities, have now returned jobless to the hill country. “There is a sudden increase in three-wheeler drivers in Maskeliya. That is because many of us had to come back from Colombo after the COVID-19 outbreak as there was no other option of making a living there,” says Murugaiyya Vigneswaran, 28, who lost his mason job in Colombo. “I took a loan and bought this three-wheeler, but it is not easy to find hires.” He relies on his neighbours in the estate engaging his autorickshaw for an urgent visit to Maskeliya town, paying LKR 1,500 (or two day’s gross wages) for the round trip, as estate roads are not serviced by public transport.
Elders in the community note that it is over the last two decades that Malayaha Tamil youth from the estates ventured out looking for jobs, escaping the estates where their parents toil all day braving blood-sucking leeches and stinging wasps. But they couldn’t escape hardship.
Precarious jobs abroad
While some migrated to the capital and big towns in the prosperous Western Province, others found jobs as domestic and construction workers in West Asian countries. Sri Lanka’s hill country, along with high-migration districts such as Kurunegala in the North Western Province and Batticaloa in the Eastern Province, supplies a steady flow of cheap labour abroad. Of the over 2 lakh workers who migrated from Sri Lanka in 2018, more than half were unskilled workers and housemaids, official data show. But the raging virus made their lives and jobs overseas even more perilous than at home.
As many as 47 Sri Lankan migrant workers have succumbed to COVID-19 in West Asian countries, according to Mangala Randeniya, spokesman of the Sri Lanka Bureau of Foreign Employment. This is more than four times the number of deaths reported in Sri Lanka. The migrant workers’ funerals were held where they were last employed, as their families in Sri Lanka grieved from thousands of miles away.
Some 40,000 workers, who are out of work in West Asia, are trying to return home. Wary of importing more carriers of the virus, after dozens who returned in special flights tested positive on arrival, the Sri Lankan government is staggering their repatriation in phases. Others wait, with savings for food dwindling, insecure accommodation, the constant fear of infection, and no clarity on their date of return or prospects in Sri Lanka thereafter.
“Two of my nieces and a nephew are working abroad. We still don’t know when they can return, we are really worried,” says Bagyalakshmi. This is the prevalent anxiety among migrant workers’ families.
For over 10 years now, Somasundaram Mallika has been raising her older sister’s three children, in addition to two of her own, in Badulla district, in the neighbouring Uva Province. “My sister is the only breadwinner in her family after her husband passed away. She had no choice but to leave the country for work. Thankfully she still has her job, but with this virus we don’t know when we will see her next,” says Mallika.
Her sister Somasundaram Yogam did many jobs abroad before her current one as a housemaid in Saudi Arabia. Speaking to The Hindu over telephone, she says: “I don’t go out anywhere because of the COVID risk. I hear many housemaids like me have lost their jobs, I am very lucky to still have mine.”
Despite a secure job and a reasonable salary, many workers find it very hard to be away from their families. Unlike Yogam, many don’t have reliable relatives to care for their children. “I miss them very much, but what do you do when you have to work?” she says.
Yogam would seem better off compared to hundreds of Sri Lankan garment workers in Jordan who were sacked after the pandemic. Around 200 of them returned last week, but another 500 are stuck there, according to Abiramy Sivalogananthan, Sri Lanka coordinator for the Asia Floor Wage Alliance, engaged in international campaigns for collective bargaining in the global garment industry. “The factories first reduced the meals they are mandated to provide from three to two, and then stealthily obtained signatures from the workers in documents saying they were resigning, to be exempted from paying social security,” she says.
Moreover, skilled expat workers have been returning to Sri Lanka with less difficulty, even from high-risk countries such as the U.S. and the U.K. “It’s not just the employers abroad who manipulate and exploit migrant workers, our own government discriminates against low-skilled workers by making their return very hard,” Sivalogananthan observes.
Labourers like Bagyalakshmi or Yogam, or those back from Jordan might make an occasional news headline in Sri Lanka, but they almost never figure in policy talk on the national economy. Those discussions begin and end with the outcome of their labour – be it tea and rubber or garments that together make up about 65% of exports; or migrant remittances that are the main source of Sri Lanka’s foreign exchange. In 2019, inward remittances added up to $6.7 billion.
With all key foreign exchange earners – tourism, exports and remittances – of the country badly hit, Sri Lanka is facing its biggest foreign exchange crisis in history, by the government’s own admission.
The Central Bank and the government have taken several urgent measures. In March, authorities restricted import of non-essential goods and soon relaxed foreign exchange regulations, inviting deposits in foreign currency. The government curtailed outward remittances.
Meanwhile, the Central Bank recently obtained a $400 million currency swap from the Reserve Bank of India to boost its reserves, while President Gotabaya Rajapaksa has requested Prime Minister Narendra Modi for an additional $1.1 billion currency swap. Sri Lanka has also sought emergency financial support from the International Monetary Fund, under its Rapid Credit Facility. The request is under assessment.
Faced with a tumbling currency – about LKR 187 (roughly ₹74) to an American dollar – fast-depleting foreign exchange reserves and a daunting repayment schedule this year, Sri Lanka has no time to lose while fixing its battered economy.
But the task is far from easy. The government can’t open up the country for tourists without increasing the risk of a spike in new cases. It can’t strengthen exports until other countries, or at least Sri Lanka’s key markets, are ready to buy what it has to sell.
Evidently, the newly installed Rajapaksa government is under enormous pressure – not only to keep Sri Lanka’s unblemished debt servicing record, but also to enhance local production and create local demand in order to keep the economy ticking until international markets brighten.
Sri Lanka’s rural economy, sustained largely by agriculture and fisheries, has been crying for attention for years – evidenced in the recurring farmer and fisher protests around cost of inputs, profiteering by intermediaries, and unstable incomes.
Also, it is not just the country that is growing more and more indebted. Many of its poor citizens too are mired in stifling debt. While the national spotlight is on the outstanding foreign debt, rural women across the country, including in the civil war-affected north and east, have been living off borrowed money, often microfinance loans that agents push at their doorsteps.
Trapped in servicing the exorbitant interest rates – even more than 200% in some cases – of multiple loans, some have tragically taken their own lives, just as Jaffna-based Surendrarasan Mariarata did earlier this month. The fast-growing concern about predatory microfinance loans, especially among women, evoked a poll promise from Gotabaya Rajapaksa ahead of last year’s presidential elections for relief from microfinance loans. The indebted women await action before more lives are lost.
Where are the jobs?
Most policymakers in Sri Lanka agree that in order to tackle prevalent household indebtedness or generate greater local demand, the government must necessarily create jobs. President Gotabaya Rajapaksa has recently resumed a programme to provide jobs to 50,000 unemployed graduates and 1 lakh low-income earners. But there are several thousand more, unable to complete school and desperately looking for jobs, others like the hill country youth who are now out of work, or the migrant workers who are back in the country with uncertain futures. They will need different kinds of jobs.
“In the hill country, for instance, they could set up industries that do value addition. Why must those factories be based in Colombo when all the tea is produced here,” asks Fr. Isaac Daniel Dixon, pastor at a Maskeliya church attended mostly by estate workers. His congregation includes many youth who lost their jobs in Colombo and returned recently. “Some end up as labourers in the same estates as their parents, doing the job their parents hoped they never would.”
Immediately after the new government was installed this month, and ministerial portfolios allocated, President Gotabaya Rajapaksa emphasised the need to promote local industry. The thrust, aligned to the ruling party’s nationalist, populist election plank, is not new to Sri Lanka. Neither are leaders’ customary poll-time promises to alleviate poverty. Campaigning in the southern Hambantota district on the eve of the August 5 elections, the President pledged to build a “people-centric national economy, fully owned by the people.”
Sri Lankans know well that for a promise to translate to policy and more crucially, action, the government’s political might alone will not do. Therein lies the Rajapaksa brothers’ next big test. (The Hindu)