2022.07.20
Natural and man-made disasters, alongside global inflation, are putting Sri Lanka into the biggest crisis since its establishment. Most vulnerable people are seriously suffering from the economic crisis. There is not much we can do from outside the country, but still, we would like to provide as much support as possible to the people who suffer most. We appreciate your kind donation.
Sri Lanka has been earning foreign money through tourism, exports (such as outsourcing), and investment from overseas, and has been purchasing fuel, chemical fertilizer, medicine, and food with it. Historically Sri Lanka has been in a continuous trade balance deficit, accounting for 10% of GDP for the last 40 years.
This situation got even worse due to several reasons – government, Covid-19, poor harvest, and the war in Ukraine. The current government is led by the Rajapaksa family. Mahinda Rajapaksa became the President in 2005 and has been told that he has been exploiting the country for personal benefit. Sri Lanka’s foreign debt increased rapidly, while a loan was executed to the Port of Hambantota, which was handed over to China due to default. Projects as such led to rebates to the Rajapaksa family. Government officials were occupied by the family members and relatives.
This was when Covid-19 struck the country. Surrounded by beautiful nature and cultural heritages, tourism was one of the main sources to acquire foreign money in Sri Lanka. This dropped to zero all of a sudden. Foreign currency reserves decreased to a critical level.
Rajapaksa family, who lost the 2015 election, committed to cutting down VAT (consumption tax) by half as one of the pledges for the 2020 election. This was a mere populist policy ignoring the nation’s financial situation. However it was welcomed by the people in Sri Lanka, and the Rajapaksa family won the election. They cut down on the VAT as promised, which obviously led to rapid deterioration of the financial status. Gotabaya Rajapaksa, the current President of Sri Lanka, is a younger brother of Mahinda.
Global poor harvest, slow down of logistics, and the war in Ukraine contributed further to the crisis. Abnormal climate resulted in poor harvest in Brazil and China, while travel restrictions due to Covid-19 led to delays in logistics. These factors combined with the Ukraine war pushed up the price of goods immensely. Global inflation started at great scale and speed.
The Sri Lankan government mismanaged this situation. They reduced the import of chemical fertilizers due to a lack of foreign currency reserves, claiming to promote “government-led transition to organic farming”. As a result, farming produce decreased rapidly. Sri Lanka’s inflation rate reached 55% over the last few months.
In June 2022, the country fell into a default situation. There was almost no foreign currency reserve, nor was there enough fuel available in the country. The IMF requested regime change in order to provide support. Anti-government protests accelerated day by day, and finally, the current President decided to resign on July 10th.
In any country, an economic crisis hits the most vulnerable people.
We obtain detailed cash flow information of randomly selected low-income households, through a project called the financial diary. 77% of the diarists are female, while the majority are in their 30s and 40s. Regional coverage is quite wide, from South Sri Lanka to North Sri Lanka.
Let us share the survey results conducted June 18th-19th, asking about the spending, medication, income level, and money management situation of the past 2 weeks. (Respondents; n = xx)
81% of the respondents have answered that the economic situation is “most difficult”. Comments include:
“I cannot purchase anything as the price of goods skyrocketed”
“I want to buy things but they get expensive day by day”
“I lost my job”
“I cannot buy goods necessary for farming”
“I don’t have income recently as there are no day jobs”
“I cannot buy even the daily necessities”
“Food price is rapidly increasing, I cannot buy enough food”
“Even though the food price is increasing, my income is decreasing”
66% reduced the number of meals per day, 86% experienced difficulty in obtaining food, and 99% reduced the amount of food purchased. About one-third answered that they needed to reduce medical spending due to lack of medicines in the country as well as reduced household income.
76% of respondents felt “unsafe” over the last 2 weeks. Reasons include “reduced income”, “difficulty in purchasing daily necessities”, “anxiety for the future” etc.
82% experienced a reduction in income over the last 2 weeks due to the lack of day jobs and materials for businesses. There was a loss of planned income for 39% of the respondents. Increased fuel prices led to fewer business opportunities too.
25% of the respondents borrow money, not from financial institutions but from friends, families, and relatives.
Given this situation, we have decided to raise funds for humanitarian aid.
How to raise funds
We will raise funds through General Foundation Gojo, and provide support through Sejaya Micro Credit which is a group company of Gojo & Company. Sejaya has 26 branches in 17 regions out of the 25 administrative divisions defined by the government.
Who to support
Everyone is suffering one way or another, but we have decided to support pregnant women and children in orphanages.
Why we have decided to support them
It is very difficult to identify the “most affected” segment. To begin with, income estimation of low-income people is hard. Also, it is not appropriate to decide the target segment based on historical income, as farmers tend to be better off under inflation compared with others.
Therefore, we have decided to support pregnant women and also children in orphanages. Pregnant women tend to have a higher risk of malnutrition, while orphanages typically have limited support in Sri Lanka.
How to support them
Sejaya will coordinate with the Ministry of Health and identify pregnant women in Sejaya’s operating regions. We will provide either cash or food vouchers worth 5,000 Sri Lanka Rupees per beneficiary.
How much impact will be created
330 thousand babies are born in Sri Lanka every year. Simple calculation tells us that the number of pregnant women close to birth is around 80 thousand. We will be able to support 4,000 people if we reach 5% of them.
Children in Sri Lanka orphanages are said to be 14 thousand. If we reach 10% of them, we will support 1,400 children.
Adding both segments, the number of beneficiaries will be at least 5,000 people. Assuming we give them 15 USD per beneficiary, we will need roughly 75,000 USD. The more funds we raise, the more support we can extend.
Is the IMF not supporting Sri Lanka?
There is a possibility that the IMF might support the country, but it is said that the negotiation will only bear fruit in late August. We should assume there will be limited support for at least 3 months from now. People cannot live without eating and drinking for 3 months.
Why not let international NGOs do the work?
The World Food Program is already tackling this issue. However, it seems like moving around in the country is difficult due to lack of fuel. Moreover, large international NGOs tend to take time till the support reaches the beneficiaries. If it is financial support, we can provide support faster than these NGOs.
We have closed donation applications for this project. Thank you for your support.
Please provide your kind donation by filling out this form. Make sure to select “Donation for Humanitarian Emergency Support Project” for the use of funds.
Early this month, we held a webinar discussing the crisis in Sri Lanka and the untold reality from the field, inviting Nirmalan (CEO) and Satish (Director) of Sejaya, a Gojo Group company.
The webinar recording is accessible through this link.
Thank you for your kind support.
Taejun Shin
