A day after angry mob converged in front of President Gotabaya Rajapaksa’s Colombo residence, demanding he step down immediately, he declared a state of Emergency in Sri Lanka.

Sri Lankan Crisis: A backgrounder

• Sri Lanka’s economic crisis can be traced to two key developments— the Easter Sunday bombings of 2019 that deterred tourists, and the pandemic since early 2020.
• These events stalled recovery and further drained the economy.
• As it grappled with an unprecedented challenge, the Rajapaksa regime made policy choices that are now proving to be costly.
• It cut the government’s tax revenue substantially and rushed into an ‘organic only’ agricultural policy that will likely slash this year’s harvest by half.
• The weak and debt-ridden economy with the lingering strain of the pandemic, and ill-advised policies accelerated the downward spiral.

What were the economic indicators?

• COVID-19 hit Sri Lanka’s key foreign revenue earning sectors hard.
• Earnings from tourism, exports, and worker remittances fell sharply in the last two years.
• But the country could not stop importing essentials, and its dollar account began dwindling.
• Fast draining foreign reserves, a glaring trade deficit, and a related Balance of Payments problem came as crucial signals.
• Colombo’s huge foreign loan obligations and the drop in domestic production compounded the economic strain.

When did things begin to worsen?

• The long-simmering crisis made its first big announcement during last August’s food emergency, when supplies were badly affected.
• It was soon followed by fears of a sovereign default in late 2021, which Sri Lanka averted.
• But without enough dollars to pay for the country’s high import bill, the island continued facing severe shortage of essentials — from fuel, cooking gas, and staple foodgrains to medicines.

How did the crisis manifest itself on the ground?

• Consumers could not find the most basic things such as petrol, LPG cylinders, kerosene, or milk in the market.
• They spent hours waiting in long queues outside fuel stations or shops.
• Supermarket shelves were either empty or had products with high price tags that most could not afford.
• For instance, the price of one kg of milk powder, a staple item in dairy-deficient Sri Lanka, suddenly shot up to nearly LKR 2000 in March.
• Be it cooking gas, oils, rice, pulses, vegetables, fish, meat, consumers found themselves paying substantially more, or simply had to forego the item.
• The fuel shortage has led to long blackouts — up to 13 hours — across the island.

What is the situation now?

• The value of the Sri Lankan rupee has dropped to 300 against a U.S. dollar (and even more than 400 in the black market), putting importers in a difficult spot.
• The government is unable to pay for its import shipments, forcing consignments to leave the Colombo port.
• For the average citizen contending with COVID-induced salary cuts and job losses, the soaring living costs have brought more agony.

How did India help mitigate the crisis?

• India has extended $2.4 billion this year.
• China, that is considering a fresh request from Colombo for $2.5 billion assistance, in addition to the $2.8 billion it has extended since the pandemic broke out.
• The government has decided to negotiate an International Monetary Fund programme, while seeking support from other multilateral and bilateral sources.
• But even with all this help, Sri Lanka can barely manage.

How has it affected the people?

• Sri Lankans are seething with anger, going by public demonstrations and protests.
• They want the President to step down immediately and the ruling clan to leave the country’s helm.
• They have been agitating in different parts of the country, including near the President’s home.
• Former military man Gotabaya Rajapaksa, who came to power on a huge mandate in 2019, is Sri Lanka’s most unpopular leader today.
• Following the protests near his home, Mr. Rajapaksa said “extremists” were plotting an ‘Arab Spring’ and hence he declared a state of Emergency.

Back2Basics: Financial Emergency in India

• The President of India can declare the Financial Emergency on the aid and advise of the Council of Ministers.
• She/ He has to be satisfied that a situation has arisen due to which the financial stability or credit of India or any part of its territory is threatened.
• Article 360 gives authority to the President of India to declare a financial emergency.
• However, the 44th Constitutional Amendment Act of 1978 says that the President’s ‘satisfaction’ is not beyond judicial review.
• It means the Supreme Court can review the declaration of a Financial Emergency.

Parliamentary Approval and Duration

• A proclamation of financial emergency must be approved by both the Houses of Parliament within two months from the date of its issue.
• A resolution approving the proclamation of financial emergency can be passed by either House of Parliament (Lok Sabha or Rajya Sabha) only by a simple majority.
• Once approved by both the Houses of Parliament, the Financial Emergency continues indefinitely till it is revoked.
• It may be revoked by the President anytime without any Parliamentary approval (but with the usual aid and advice).

Effects of Financial Emergency

• During the financial emergency, the executive authority of the Center expands and it can give financial orders to any state according to its own.
• All money bills or other financial bills, that come up for the President’s consideration after being passed by the state legislature, can be reserved.
• Salaries and allowances of all or any class of persons serving in the state can be reduced.
• The President may issue directions for the reduction of salaries and allowances of: (i) All or any class of persons serving the Union and the judges of the Supreme Court and the High Court.

Try this PYQ:

Q. With reference to the Constitution of India, prohibitions or limitations or provisions contained in ordinary laws cannot act as prohibitions or limitations on the constitutional powers under Article 142. It could mean which one of the following?

 

(a) The decisions taken by the Election Commission of India while discharging its duties cannot be challenged in any court of law.

(b) The Supreme Court of India is not constrained in the exercise of its powers by laws made by the Parliament.

(c) In the event of grave financial crisis in the country, the President of India can declare Financial Emergency without the counsel from the Cabinet.

(d) State Legislatures cannot make laws on certain matters without the concurrence of the Union Legislature.

 

Post your answers here.

3

Please leave a feedback on thisx

UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now