Sri Lanka's crisis shows how debt is devouring the Global South

"From Africa to Asia to Latin America, billions go hungry while creditors profit. Sri Lanka is undergoing one of the most complex economic recoveries in its history. The country's financial collapse in 2022 was precipitated by a toxic mix of unsustainable borrowing, poor fiscal management, and external shocks. Mass protests erupted under the banner of Aragalaya, a broad-based citizens' movement demanding accountability, economic justice, and an end to political corruption."

"The uprising ultimately forced the resignation of the sitting president, Gotabaya Rajapaksa. However, following his resignation, the administration of Ranil Wickremesinghe recaptured power. Delaying calls for new elections, in 2023 the Wickremesinghe administration negotiated $3bn of support from the International Monetary Fund (IMF) under its New Extended Fund Facility (EFF) arrangement. Later that year, to unlock a second instalment of this bailout package, Sri Lanka also reached a debt restructuring agreement with a group of creditors including China, India, and Japan."

"Even though, by September 2024, the Sri Lankan people elected a progressive government led by President Anura Kumara Dissanayake, with a historic mandate, the new administration has since been trapped within the constraints imposed by the IMF and the previous political establishment. The mainstream neoliberal narrative has been quick to highlight the arrangement with the IMF, known as the 17th IMF program, as a sign of stabilisation, praising the debt restructuring agreement and compliance with IMF conditions."

Sri Lanka experienced a financial collapse in 2022 caused by unsustainable borrowing, poor fiscal management, and external shocks. Mass protests under Aragalaya forced the president's resignation but a successor administration regained control and delayed elections. In 2023 the government secured $3bn from the IMF under a New Extended Fund Facility and negotiated debt restructuring with major creditors including China, India, and Japan. A progressive government won a historic mandate in September 2024 but faces binding IMF conditions and legacy political constraints. The recovery program enforces privatization, monetary and fiscal limits, and shifts domestic debt burdens onto working people's savings.

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