Month: April 2022

The island nation is facing its worst economic crisis since gaining independence from Britain in 1948 and is facing food shortages, soaring prices and power cuts.

Many say the government is to blame.

Sri Lanka’s problems come down to the fact that its foreign currency reserves have virtually run dry.

It means it cannot afford to pay for imports of staple foods and fuel, leading to acute shortages and very high prices.

The government blames the pandemic, which all but killed off Sri Lanka’s tourist trade – one of the island’s biggest foreign currency earners.

It also says tourists were frightened off by a series of deadly bomb attacks on churches three years ago.

However, many experts say economic mismanagement is to blame.

There are many reasons for this, but one main factor is that at the end of its 30-year civil war in 2009, Sri Lanka chose to focus more on its domestic markets instead of exporting to foreign ones. So income from exports remained low, while the bill for imports kept growing.

The government also racked up huge amounts of debt to fund what critics have called unnecessary infrastructure projects.

At the end of 2019, Sri Lanka had $7.6bn (£5.8bn) in foreign currency reserves, but by March 2020 it had only $2.3bn (£1.75bn).

When he came to power in 2019, President Rajapaksa decided to cut taxes. This meant the government had less money to buy foreign currency on the international markets to increase its reserves.

When Sri Lanka’s currency shortages became a really big problem in early 2021, the government tried to stop the outflow of foreign currency by banning all imports of chemical fertiliser, telling farmers to use organic fertilisers instead.

This led to widespread crop failures.

Sri Lanka had to supplement its food stocks from abroad, which made its foreign currency shortage even worse.

Since then, the government has banned the import of a wide range of “non-essential” items – from cars to certain types of food and even shoes.

One way that countries can boost their exports is to cut the value of the currency, but the government refused to let the Sri Lankan rupee fall against other currencies.

It finally did so in March 2022, and the rupee fell more than 30% against the dollar.

Sri Lanka’s government has to raise $7bn in foreign currency this year to pay down its debt. It will have to make similar payments for years to come.

The government would like to make new finance deals to settle its debts, but its credit rating has fallen so low that very few institutions will lend it money. As a result, it has been running down its foreign reserves simply to pay the interest on the current loans.

Mass protests flared up in early April with people calling for President Rajapaksa to resign, which he has refused to do.

People are furious because the cost of living has become unaffordable. They are paying up to 30% more for food compared with a year earlier, which has led to some people having to cut down not only on what food they buy, but also the number of meals they eat every day.

Shortages of fuel have seen long lines at petrol stations, while the crisis has also hit public transport services.

“Earlier I used to get a bus in 15 minutes, now I have to wait one to two hours. Sometimes the bus stops midway with no fuel,”

As demonstrations grew, the president imposed a curfew, a draconian emergency law and a ban on social media. However, when these failed to keep protesters off the streets, he withdrew the measures.

President Rajapaksa then sacked everyone in his cabinet apart from the prime minister, Mahinda Rajapaksa, who is his brother. He also sacked the governor of the central bank.

The new finance minister he appointed resigned less than 24 hours after taking the job.

The president asked opposition MPs to help form a new government, but they have refused. Instead, more than 40 MPs aligned to the ruling coalition in parliament have left it.

In March, Sri Lanka’s government asked the International Monetary Fund (IMF) for a bailout.

The new central bank governor, P Nandalal Weerasinghe, will lead the negotiations between the government and the IMF. However, the talks have had to be postponed until a new finance minister is found.

Meanwhile, Sri Lanka is being helped by friendly neighbours such as India. It has begun supplying fuel to Sri Lanka on a $500m credit line.

China has agreed to bolster Sri Lanka’s foreign currency reserves by swapping the Lankan rupee for its currency, the renminbi.

It has also taken loans from countries like Japan and Bangladesh.

The ministers’ annual meeting – known as the 2+2 Dialogue – was launched in 2018 to deepen co-operation between the two countries.

The forum has focused on improving bilateral relations and co-operation in Asia. It is also seen as part of Washington’s strategy to help India become a counterweight to China in the region.

The two nations have largely been on the same page – at least in their public statements – on most issues of mutual concern.

But it’s not business as usual this time because of Russia’s invasion of Ukraine.

Delhi’s press release ahead of the talks included the usual line about strengthening the “comprehensive global strategic partnership” between the two countries.

But Washington’s statement mentioned “mitigating the destabilising impacts of Russia’s war against Ukraine”, suggesting that the US will again nudge India – perhaps not too hard – to take a stronger position on Moscow.

India and the US have had differing views over Ukraine since the war began in February.

While Delhi has used strong words to comment on the invasion, it hasn’t directly criticised Moscow. It has also abstained from all UN votes against Russia.

India has also been trying to find ways to circumvent banking sanctions on Moscow to take advantage of discounted oil prices offered by Russian firms.

India’s stand of non-alignment also stems from its own geopolitical needs. Moscow is Delhi’s time-tested ally and also its largest supplier of defence equipment – accounting for more than 50% of its imports.

A former Indian diplomat said Delhi’s stand has put Washington in a Catch-22 situation.

The US wants India to be part of its wider strategy of isolating Russia but at the same time, it can’t afford to weaken India against China – both diplomatically and militarily.

Experts say this has created confusion in the White House about the best way to deal with India.

Washington has not directly criticised India but has issued statements that experts call “mild warnings”.

After Mr Modi refrained from criticising Russia during a recent meeting of the Quad – which also includes Australia, the US and Japan – on Ukraine, Mr Biden said India’s stand on the war was “somewhat shaky”.

His top economic adviser Brian Deese later said India had been informed that the consequences of a “more explicit strategic alignment” with Moscow would be “significant and long-term”.

But this didn’t deter India as it once against abstained from the vote that suspended Russia from the UN Human Rights Council.

Other US officials, including US Deputy National Security Adviser for International Economics Daleep Singh, have appeared to be more understanding of India’s stand.

While Mr Biden and Mr Modi are likely to focus on bilateral ties, Ukraine still looms large over the meeting.

It will also be on the agenda when Indian Foreign Minister S Jaishankar and Defence Minister Rajnath Singh meet their US counterparts Antony Blinken and Lloyd Austin on Monday.

Both sides have been clear about their differing stands on Ukraine but there is too much at stake to risk their bilateral relationship.

Washington sees India as an ally to challenge China’s dominance in the Asia-Pacific region.

Both countries also believe that there is massive untapped potential in bilateral trade.

They have the ambitious target of taking bilateral trade – which was at $113bn in 2021 – to $500bn in the future.

India also needs the US to help diversify its defence portfolio and reduce its reliance on Russian arms.

Moscow continues to be India’s largest arms supplier even though its share has dropped to 49% from 70%. The US was India’s second-largest supplier between 2011 and 2015 after Russia, but fell behind France and Israel in the period between 2016 and 2021.

Both Washington and Delhi would want to improve on these statistics.

But the elephant in the room will continue to be India’s purchase of the S-400 missile defence system from Russia – a deal which gives India strategic deterrence against both China and Pakistan.

The agreement has come under the Countering America’s Adversaries Through Sanctions Act (Caatsa), which was introduced in 2017 to target Russia, Iran and North Korea with economic and political sanctions. It also prohibits any country from signing defence deals with these nations.

The US had sanctioned China for buying the same system in 2018.

But so far, it has been evasive about doing the same for India. It had refrained from sanctioning India even after the country started receiving the first deliveries of the S-400 in December last year.

But the Ukraine war will now further complicate the situation.

Some US officials have said in the past that there was no guarantee that India would get a waiver.

Now, in the fast-changing geopolitical scenario, both Washington and Delhi would not want to publicly take stands against each other.

But when the defence ministers meet, the S-400 and the issue of sanctions will definitely come up.

How the two countries deal with this and their other differences will determine the future course of Washington-Delhi ties.

More than 90% of those who cast their votes said they wanted the president to stay in office, a quick count suggests.

But turnout was low at less than 19%, according to preliminary figures.

The president had called the unprecedented referendum, which critics said was a tactic to distract from his government’s failures.

In Mexico, presidents are limited to a single six-year term in office.

But since before he was sworn in as president in 2018, Andrés Manuel López Obrador has promised to give voters a chance to remove him from office half-way through his term.

He argued that the referendum was vital to validating his democratic mandate.

With approval ratings around 60%, Mr López Obrador knew that he had every chance of winning the vote.

Moreover, the vote carried little risk for the president. In order to be binding, at least 40% of voters would have had to cast their ballots, an unlikely turnout in this first recall referendum to be held in Mexico.

Opponents of the divisive president labelled it as a waste of money and urged Mexicans to boycott it -and those who did turn out overwhelmingly backed the president.

President López Obrador celebrated the result, saying in a video address that “more than 15 million Mexicans are happy and want me to continue until September 2024” when his term comes to an end.

Some critics of the president feared that he may try to use an overwhelming victory in the recall referendum to pave the way for lifting Mexico’s one-time presidential term limit.

But late on Sunday, Mr López Obrador stressed he had no intention of staying in power beyond the end of his term in 2024.

“I will continue to serve until the last day of my term, I will not go further than that because I am a democrat and I am not in favour of re-election,” he said.

BBC Mexico Correspondent Will Grant says that the president will point to his wide margin of victory as evidence that his policies are popular among Mexicans, while his opponents will try to use the low turnout against him.

“Make no mistake, nothing is decided,” he told cheering supporters.

In the end, he won a convincing first-round victory, but opinion polls suggest the run-off could be much closer.

Ms Le Pen called on every non-Macron voter to join her and “put France back in order”.

With 97% of results counted, Emmanuel Macron had 27.6% of the vote, Marine Le Pen 23.41% and Jean-Luc Mélenchon 21.95%.

Veteran far-left candidate Jean-Luc Mélenchon polled even better than five years ago and now has the unlikely role of kingmaker.

“You must not give a single vote to Marine Le Pen,” he warned his supporters, but unlike other candidates, he pointedly did not back the president instead. Later in the evening, Mélenchon activists gathered outside his campaign HQ thinking he might even come second, but it was not to be.

Making up more than a fifth of the vote, Mélenchon voters could decide the final round of this election, yet many of them may just sit the second round out and abstain.

Twelve candidates were in the running, but these were the only three who polled more than 10%. Many voters appeared to embrace the idea of tactical or “useful” voting, deciding that the other nine candidates had no hope of making the run-off.

Several of the nine had little chance anyway, but the 2022 presidential election will be partly remembered for the disaster that befell the two old parties that used to run France, the Republicans and Socialists. They sank almost without trace, with Socialist Anne Hidalgo falling below 2%.

It was only a few months ago that Valérie Pécresse was still in the race for the right-wing Republicans. She performed so badly, her party could not even scrape the 5% needed to claim its election costs.

This is potentially terrible news for a party already tearing itself apart. Parties that fail to reach 5% only get €800,000 (£670,000) of their campaign funding covered by the state, and the Republicans will have paid out far more than that.

A renewed battle for votes is under way. Marine Le Pen can count on supporters of Eric Zemmour, whose more hardline nationalism won him fourth place and 7%. Nationalist Nicolas Dupont-Aignan has also backed her. She can already count on an impressive 33% of the entire vote.

ANALYSIS: No walkover for Macron

Mr Macron’s team is planning a series of big rallies and major TV appearances. Most of the other candidates on the left have backed him, as has Valérie Pécresse, but one-time Socialist candidate Ségolène Royal said the president now had to “earn” victory.

Ifop pollster François Dabi said his company’s 51%-49% estimate for the run-off was the closest they had ever predicted. An Elabe poll put the gap at 52%-48% and an Ipsos poll suggested it was wider still.

Addressing his supporters, Mr Macron looked a relieved man and he promised to work harder than in the first part of the campaign. He had only started campaigning eight days before the vote, his mind more focused on Russia’s war in Ukraine.

“When the extreme right in all its forms represents so much of our country,” he said, “we cannot feel that things are going well.”

He addressed Le Pen voters too: “I want to convince them in the next few days that our project answers solidly to their fears and challenges of our time.”

Ms Le Pen said it was time for a “great changeover”, with a fundamental choice on 24 April of two opposite views: “Either division and disorder, or a union of the French people around guaranteed social justice.”

She has built her campaign around the cost-of-living crunch facing much of Europe, promising to cut taxes and waive income tax for under-30s. There has been less emphasis on nationalism, but she wants a referendum on restricting immigration, radical change to the EU and a ban on the Islamic hijab in public areas.

The campaign only sparked into life in the final fortnight, first because of the Covid pandemic and then the Russian war. But in the end, the spring sunshine meant turnout was not as low as feared, at almost 75%.

One in four young voters backed the president, although more than one in three 18-24 year-olds opted for Jean-Luc Mélenchon, according to Elabe pollsters.

Marine Le Pen performed best among 35-64 year-olds, while the president was favoured by over-65s.

It was already clear from Mr Macron’s speech that he planned to target Ms Le Pen’s close links with the Kremlin. Although she has condemned Vladimir Putin’s war, she visited him before the previous election in 2017 and her party took out a Russian loan.

He wanted a France that made alliances with great democracies to defend itself, he said, not a state that would leave Europe and have only populists and xenophobes for allies.

The chancellor wants Lord Geidt – the PM’s adviser on ministers’ interests – to check if he followed the rules.

Mr Sunak’s wife, Akshata Murty, last week announced she would start paying UK tax on her overseas earnings.

But Labour says he still has questions to answer about transparency and whether he has used tax havens.

Mr Sunak said he was “confident” a review by Lord Geidt, who investigated allegations about Mr Johnson’s refurbishment of his Downing Street flat, would find he had appropriately declared all his interests.

Ms Murty owns £700m in shares of the Indian IT giant Infosys – founded by her father – from which she received £11.6m in dividend income last year.

The BBC estimates she would have avoided £2.1m a year in UK tax through her non-domicile (non dom) status.

She will now pay tax on her overseas earnings, but her domicile remains India, where she has said she intends to eventually return.

Mr Sunak said he had made the Cabinet Office aware of his wife’s non-dom status when he first became a government minister in 2018.

He has ordered a leak inquiry into how that information came to be reported in the media.

Downing Street has rejected newspaper reports that its staff leaked damaging stories about Mr Sunak to the media.

Rishi Sunak’s reputation has gone from golden to tinfoil. His personal ratings have plummeted and his leader-in-waiting status has been dented, if not destroyed.

But his job as chancellor looks safe for now.

He has the backing of the prime minister so won’t get fired.

The number of Conservative backbenchers grumbling about his handling of this appears to be outweighed by the number of colleagues who think he’s a good operator so they won’t get rid of him. And the review into his declarations of interests isn’t likely to cause him too many problems either.

But all of that could change under pressure from the opposition, the media and any further revelations, or if he becomes a threat to the reputation of the government.

What will be fascinating to see is whether this changes the approach Rishi Sunak takes to the rising cost of living.

Will the chancellor accused of being too rich feel he has to do more to help people who are getting poorer?

It feels like Rishi Sunak has gained a lifetime’s-worth of baggage in a fortnight.

Most politicians have it – what matters is how much it weighs them down.

Labour’s shadow home secretary Yvette Coopers said questions faced by Mr Sunak include whether he had declared his wife’s tax status when taking “policy decisions” affecting non-dom households.

“The lack of transparency does raise questions about conflict of interest,” she told BBC.

“The fact that they have changed their tax arrangements now shows that they do recognise it’s a problem – but they wouldn’t have done that if this hadn’t been public.”

It has also been revealed that Mr Sunak held a US green card until last year, entitling him to permanent residence, a path to citizenship, in that country.

It also means he filed US tax returns, prompting opposition questions about whether he gained a financial advantage from this.

Labour also says the public need to know if Mr Sunak has ever benefitted from tax havens.

It follows a report in the Independent which said Ms Murty had received income from companies based in tax havens.

A non-dom is a UK resident who declares their permanent home, or domicile, outside of the UK.

A domicile is usually the country his or her father considered his permanent home when they were born, or it may be the place overseas where somebody has moved to with no intention of returning.

For proof to the tax authority, non-doms have to provide evidence about their background, lifestyle and future intentions, such as where they own property or intend to be buried.

Those who have the status must still pay UK tax on UK earnings but do not need to pay UK tax on foreign income. They can give up their non-dom status at any time.

Ms Murty has chosen to be domiciled in India via her father, the billionaire Narayana Murty.

The company suggested over the weekend that “tourist travel” would return on Thursday, 14 April.

But on Monday it tweeted some sailings have resumed, with departures from Cairnryan at 04:00 BST, 12:00 and 20:00 and Larne at 08:00, 16:00 and 23:59.

The European Causeway boat used on the service was detained in Larne last month over safety concerns.

That followed the company sacking 800 staff without notice and replacing them with cheaper agency workers.

There was confusion over the weekend when P&O initially tweeted that passengers could come on board from Sunday, but that changed to Wednesday before Thursday was suggested as a likely start date.

The operator’s Dover-Calais service is expected to resume on that date. P&O said on Monday sailings “remain cancelled”.

On Saturday the European Causeway sailed, with limited services, on a return journey between Larne and Cairnryan.

It was the first time the vessel had been allowed to sail since it was detained in Larne a fortnight ago, but only freight was transported on the vessel. It is now understood foot passengers are allowed to travel again.

The RMT union has said it would attempt to blockade ports, including Cairnryan, in protest when the ferry operator started running what the union labelled its “ships of shame” again.

Regional organiser Gordon Martin branded the company “capitalist bandits” for the way in which it sacked staff with no notice via video call.

“We will be after you, we will be coming to Cairnryan, Larne, and elsewhere and we will be targeting your supply chain,” he told BBC Scotland.

“Anybody dealing with P&O – I’ll send a clear message to them – whether it be fuel providers, food providers, whatever it may be.

“We will find out who you are and you will be part of our efforts to get proper legislation in place to protect workers.”

The European Causeway was initially detained in Larne with the Maritime and Coastguard Agency (MCA) concerned about “failures on crew familiarisation, vessel documentation and crew training”.

Stena Line have put on extra ferries from Cairnryan to Belfast to compensate for the postponement of P&O services.

The operator increased its daily sailings on the route from 12 to 18 and said its staff had been working hard to meet demand.

The Scottish government condemned the “serious disruption” P&O’s actions had caused to the supply chain between Scotland and Northern Ireland.

A spokesman said: “The employment practices P&O have needlessly pursued have no place in a modern working practices.

“The Scottish government has been absolutely clear that we will stand by the workers who have been let down in the most appalling manner imaginable by P&O.”

He added ministers were seeking urgent meetings with the UK government to discuss the matter.

A spokesman for the UK Department for Business, Energy and Industrial Strategy said: “The Insolvency Service has confirmed it has commenced formal criminal and civil investigations into the circumstances surrounding the recent appalling behaviour of P&O Ferries, following the Business Secretary asking they undertake a thorough review.

“We will not provide further comment while investigations are ongoing.”

P&O has been approached for comment.