The south asian country is suffering severe shortages of essential goods high inflation and crippling power blackouts the country took loans worth 45 billion dollars from various countries including more than 8 billion dollars from china all 26 ministers of the cabinet quit all together just late last night high inflation shortage of basic essentials.
And riots are spreading rapidly across the entire country shashi dhanatonga an economist has said the loans taken from china triggered the misery in sri lanka hi everybody in the past couple of weeks we've all been hearing about the terrible economic state of sri lanka and how much the condition has blown out of control inflation has hit a horrific.
17.5 percent school exams have been cancelled due to lack of ink and paper cabinet ministers have resigned and by the time you watch this episode maybe the president might have quit too and while most of us will ignore it because it has got nothing to do with us in india i got to tell you that it is very very important to study the failure of.
Sri lanka why because it has got some very very important pointers by which we can keep a check on our government so that we don't end up like sri lanka so in this episode today we are going to put out the simplest explanation as to what exactly went wrong with sri lanka how did the government of sri lanka recklessly slip the country into an.
Economic crisis and most importantly as citizens of india what are the checks that we need to keep on the government of india so that we don't end up like sri lanka this video is brought to you by cuckoo fm but more on this at the end of the video charlo let's start from the basics and.
Try to understand the context first sri lanka is a diverse country with three major ethnic groups 75 percent of the country are sinali's 11 form the sri lankan tamils and 4.2 percent are indian tamil and the problem with sri lanka started way back in 1948 itself when they came up with something called the ceylon citizenship act.
This act was specifically aimed to turn srilakka into a land where only cinellis citizens live and they did that by putting two important qualifiers in the act number one this act granted citizenship to only those people who had 10 years of uninterrupted residence in sri lanka and whose income slab was above a certain.
Stipulated level so the question is the srilankan numbers were living in sri lanka for a very long time right so what is a problem well the catch over here was that the srilankan tamils often had the habit of visiting india to visit their relatives and hence most of them did not qualify under this uninterrupted residence.
Clause on top of that many tamils also could not meet the stipulated income slabs either so when filtered through both these criterias there were only one lakh tamils who were granted citizenship under this act which meant what seven lakh people were no longer citizens of sri lanka in fact over three lakh tamils were even devoted back to india.
So seven lakh people were deliberately systematically and legally isolated in their own motherland which meant no jobs no property and no rights and once this move was made the sunnis groups also started torturing the tamils to move them out of the country and what followed next was an unthinkable level of atrocity and violence that i cannot.
Even put into words and the worst part is that all of these atrocities are said to have happened with the support of the state itself this is where in the 1960s we saw the rise of rebels who started forming groups to take on the government head-on and one of these rebels was a man named velu pillai prabhakaran who formed a.
Keriller organization called liberation tigers of tamil elam or ltte this organization was specifically aimed at creating an independent state for the tamils in sri lanka in the northern and the eastern part of the country and in the next 10 years ltt went on to become one of the most well armed and ruthless insurgent groups in the world with their.
Own army with their own navy and even their own air force and when ltd and the government of srilanka both came head-on it led to a massive civil war in sri lanka our people have lost patience lost hope and reached the brink of utter frustration they're not prepared to be tolerant any longer it's a war that has lasted on and off.
For a quarter of a century not only on land but also at sea having tigers as then own took up their armed struggle in the 1970s as a reaction to the increasing discrimination against the tamil minority late today sri lankan special forces reportedly ambushed and killed the leader of the tamil tigers sri lankan army has tightened its grip.
On the remaining tamil forces his death adds emphasis to the end of the tamil's 26-year bid to create an independent ethnic homeland and for the next 26 years from 1983 to 2009 the ltte did everything in its capacity with violence and non-violence to gain a place for the tamils in sri lanka and needless to say it was bloody.
As hell but finally the civil war came to an end when prabhakaran was killed by the sri lankan army in may 2009 now although the srilankan army claimed victory over ltte the damage had already been done 82 hundred thousand lives were lost the economy was in ruins and instead of developing the country post independence.
Sri lanka wasted 26 years in a futile civil war which ended up costing the country 200 billion dollars and this is where the phase two of the deterioration started now you see guys for any country to develop from a downfall the course of action is a five step procedure step one identify unique asset or strength of your country step.
Two use it to add value to the global economy step three when you add value to the global economy money will flow into your country from your foreign clients and once this happens you can use this money to develop your country grow your existing value proposition and create more assets to deliver more value to the global economy now this asset could be.
Anything for china it was ultra cheap labor for the electronics and textile industry for taiwan it was the semiconductor industry for singapore it was labor ports and tax regulation and for the middle east it was oil now in case of sri lanka one of the most valuable assets was the sport called the humband tota bolt.
This is sri lanka's second largest port and it handled 1.8 million tons of lpg and dry bulk cargo in 2020 and the reason why this port is super important is because number one humbun total is close to two of the most important international shipping routes which pass through the swiss canal and the strait of malacca these routes through.
Hambantota are used by about 36 000 ships including 4500 oil tankers and this sport saves about three days of sealing time and fuel secondly the deep water terminal facility of humban dota has the capacity to birth the largest of ships with utmost ease and efficiency on top of that it also has ample space for storage and also has dry weather.
Throughout the year thirdly using this sport sri lanka can even tap into the market of fuel depots in both singapore and fujira which are two of the largest fuel depots in the world that supply over 60 million tons of fuel per year this is the reason why the sri lankan government was very keen on developing this port but as we all saw due to the.
26 years of civil war the sri lankan government could not offer the capital to build this board or other projects completely by themselves and guess what here's where a dear friend shows up and this dear friend was so nice that it supplied weapons to the government invested money in long term projects and even shielded sri lanka in the united.
Nations using their veto power this friend was none other than the generous state of china and one of these long-term projects was the development of the hambun tuta port so you know what china deployed a genius strategy to trap sri lanka the worst part is that it's not just sri lanka but 40 other economically weakened.
Nations that china is trapping right now the question is what is this trap and how does it actually play out very very simple step number one since china knows that it's difficult for the economically weakened nations like sri lanka to get heavy loans either from the world bank or other countries china shows up and gives them an unbelievable.
Amount of loan in this case china gave away a billion dollar loan to srilanka to build the hamburg total port then comes step two which are conditions the first condition that china put forth in front of sri lanka and other countries is that to get this loan mostly only chinese companies get the contract for such development projects so basically.
China will give you one billion dollars in loan and then you will have to give these one billion dollars to a chinese company to build the port for you and this company will actually get you chinese workers who will actually get paid by the exact same money that was actually loaned to you and the worst part is that these chinese companies can.
Even overbill you in case if they think that the project needs more money and for this money you might have to go back to china again so practically the money is mostly flowing back to china but on paper you will owe a billion dollar debt to china along with a hefty interest in this case the company that built the humban dota port was a company called.
China harbor on top of that the second condition is that these loans are guaranteed by a cash deposit by the recipient countries in the bank accounts controlled by china for example you will have to keep 200 million dollars in a chinese controlled bank account and if you cannot pay back the loan or the interest china can directly withdraw the.
Money from that account and lastly while the world bank lenders give out loans at one to two percent interest china very generously offers these loans at four to six percent interest on top of that while conventional lenders loan repayment tenure is usually 28 to 30 years chinese loans are mostly to be repaid in.
Just 10 to 15 years so basically you pay more interest in lesser time with cash deposits that are completely in the hands of the chinese now the question over here is if these countries are economically so weak how can they actually pay back these loans with such high interest well guess what.
China knows that they cannot pay back the loan so the question is is this a loss venture for china well not really because here's where step 3 comes in which is control here's where if you cannot pay back the loan china directly takes away your asset and starts using it for itself and this is exactly what happened with.
The humber total port china gave away a billion dollar loan to sri lanka with 6.3 percent interest and since the government could not pay back the loan china took away the human total port for a 99 year lease along with an additional 15 000 acres of land now if you look at what china got out of it you will see that it got all the.
Benefits of the port's strategic position plus it gets a military advantage with the proximity to india and most importantly if you look at these kind of projects on the map of sri lanka you will see that this did not happen once or twice but over and over and over again for road projects coal power plants railways airports housing.
Complexes and a lot more and the total amount of these loans from china alone amounts to 12 billion dollars now the question over here is what the hell does china get out of all of this well this needs a separate video altogether i'm not covering this due to information overload but if you want me.
To cover it do drop a comment below and just like tanishq i will cover it up very very soon coming back to sri lanka on top of the mounting debt the tourism industry which formed 10 to 12 of sri lanka's gdp completely collapsed both due to kovid and the eastern bombings then due to the russia ukraine war the crude oil prices shot up which meant.
That a major chunk of srilanka's foreign reserves were bleeding away just to buy oil this and a lot more bad loans and bad investments started increasing the foreign debt of sri lanka to a very very dangerous level and if you look at this graph you will see that it actually rose to 119 percent of the gdp in 2021.
Foreign reserves are depleted from 9.9 billion dollars in 2018 to just 2.3 billion dollars by february 2022. now the question over here is the sri lankan politicians are not illiterate right even they've got qualified leaders who can understand basic finances then how the hell did they so recklessly take up money and deteriorate the economy to.
Such a pathetic level well long story short a large part of the garment was controlled by just one family and all thanks to their extraordinary dedication for corruption the country's economy has got every possible step wrong from 2005 to 2015 it was under a man named mahinda raja paksha and this is where the chinese death trap happened from 2015 to.
2019 it was under a man named sirisena followed by gotabaya raja paksha who is none other than mahinda's brother on top of that the chinese also funded the election where unrealistic subsidies and freebies were distributed these subsidies did get them votes but they also put corrupt people in charge and today go to where mahinda their two.
Older brothers and mahinda's son oversee departments and agencies that collectively control nearly 70 percent of sri lanka's budget now you can imagine how easy it would have been to take bad decisions with a few hundred crore and bribe in exchange for billions of dollars of public property hand over to china.
This is how ladies and gentlemen because of a bloody civil war because of over concentration of power because of corruption and bad financial decisions today the citizens of sri lanka are facing an economic crisis that is only getting worse by the day and this brings me to the most important part of the episode and that are the.
Lessons that we as citizens of india need to learn from the failure of sri lanka so that we can keep a good check on the government of india but before we move on i want to thank our partners kuku fm for supporting our content people if you want to know more about geopolitics in your own recent language i would suggest you to listen to the.
Changing world order show on cuckoo fm coco fm is india's leading audiobook platform with over 1 000 hours of content library with over 4.5 plus rating and a huge library of non-fiction content my recent favorite book summaries on their platform are the art of war and the theft of india and if these kind of subjects intrigue you then.
Use the code think 20 to get a 20 discount on the subscription on top of that the first thousand people can get a 50 discount if you use think 50 through the link in the description moving on the first lesson that we need to learn is that communal segregation is one of the biggest threats for the economy and the peace of the country which is why if.
You see no country that persecuted the minorities ever made great progress and at the same time every country that overcame communal segregation is sitting on top of the world today classic example being singapore but in this case if you see the civil war costed sri lanka 200 billion dollars 26 years of.
Golden time to grow and more importantly the lives of 80 to 100 000 people and god knows how many animals lost their life during the war and during bombings so always keep an eye on the government and never let them segregate communities based on class caste or religion lesson number two every time power is concentrated with one man or one family.
Or one party or even one company it is more likely to lead to a disaster and you will see this everywhere starting from the roman empire to nestle to sri lanka to even venezuela so always keep an eye on the political and business monopolies because they might often cross their lines to become super powerful and they will end up ruining.
Your society and lastly always choose your partners and investors very very carefully in this case we saw how srilanka made a terrible decision of taking money from china and today it is nothing but a puppet that's stuck with a dead trap so as citizens you need to keep a very close eye on your government to make sure that they don't get too.
Cozy with the wrong players whether that is the us china or for that matter any other country and more importantly always remember freebies can win you votes but they can never ever build an economy that's all from my standard today guys if you learned something valuable please make sure to the like button in order to make youtube bubba.
Happy and for more such insightful business and political case studies please subscribe to our channel thank you so much for watching i will see you in the next one bye bye