On April 12, a prolonged economic crisis came to a head as the Sri Lankan government temporarily halted payments to international creditors. This is the first time Sri Lanka has defaulted in its post-independence history, and it comes as no surprise to those who have followed the government’s incredible economic mismanagement since the election of President Gotabaya Rajapaksa in November 2019.
Sri Lanka’s economy really began to unravel a long time ago—when Gotabaya’s brother Mahinda Rajapaksa was president between 2005 and 2015. After the end of Sri Lanka’s civil war in 2009, foreign direct investment and portfolio flows from global capital markets poured into the country. This was facilitated by Chinese capital surpluses and the 2007-2008 global financial crisis, after which loose global monetary policy meant that Sri Lanka was able to borrow easily.