Covid crisis leaves Sri Lanka on brink of bankruptcy. Sri Lanka is facing a deepening financial and humanitarian crisis with fears it could go bankrupt in 2022 as inflation rises to record levels, food prices rocket and its coffers run dry.
The meltdown faced by the government, led by the strongman president Gotabaya Rajapaksa, is in part caused by the immediate impact of the Covid crisis and the loss of tourism but is compounded by high government spending and tax cuts eroding state revenues, vast debt repayments to China and foreign exchange reserves at their lowest levels in a decade. Inflation has meanwhile been spurred by the government printing money to pay off domestic loans and foreign bonds.
The World Bank estimates 500,000 people have fallen below the poverty line since the beginning of the pandemic, the equivalent of five years’ progress in fighting poverty.
Inflation hit a record high of 11.1% in November and escalating prices have left those who were previously well off struggling to feed their families, while basic goods are now unaffordable for many. After Rajapaksa declared Sri Lanka to be in an economic emergency, the military was given power to ensure essential items, including rice and sugar, were sold at set government prices – but it has done little to ease people’s woes.
Anurudda Paranagama, a chauffeur in the capital, Colombo, took on a second job to pay for rising food costs and cover the loan on his car but it was not enough. “It is very difficult for me to repay the loan. When I have to pay electricity and water bills and spend on food, there is no money left,” he said, adding that his family now eats two meals a day instead of three.
He described how his village grocer was opening 1kg packets of milk powder and dividing it into packs of 100g because his customers could not afford the whole packet. “We now buy 100g of beans when we used to buy 1kg for the week,” said Paranagama.
The loss of jobs and vital foreign revenue from tourism, which usually contributes more than 10% of GDP, has been substantial, with more than 200,000 people losing their livelihoods in the travel and tourism sectors, according to the World Travel and Tourism Council.
The situation has got so bad that long queues have formed at the passport office as one in four Sri Lankans, mostly the young and educated, say they want to leave the country. For older citizens, it is reminiscent of the early 1970s when import controls and low production at home caused severe shortages of basic commodities and caused long queues for bread, milk and rice.
The former central bank deputy governor WA Wijewardena warned the struggles of ordinary people would exacerbate the financial crisis, which would in turn make life harder for them. “When the economic crisis deepens beyond redemption, it is inevitable that the country will have a financial crisis too,” he said. “Both will reduce food security by lowering production and failing to import due to foreign exchange scarcities. At that point, it will be a humanitarian crisis.”
One of the most pressing problems for Sri Lanka is its huge foreign debt burden, in particular to China. It owes China more than $5bn in debt and last year took an additional $1bn loan from Beijing to help with its acute financial crisis, which is being paid in instalments.
In the next 12 months, in the government and private sector, Sri Lanka will be required to repay an estimated $7.3bn in domestic and foreign loans, including a $500m international sovereign bond repayment in January. However, as of November, available foreign currency reserves were just $1.6bn.
In an usual approach, government minister Ramesh Pathirana said they hoped to settle their past oil debts with Iran by paying them with tea, sending them $5m worth of tea every month in order to save “ much needed currency”.
The opposition MP and economist Harsha de Silva recently told parliament that foreign currency reserves would be -$437m by January next year, while the total foreign debt to service would be $4.8bn from February to October 2022. “The nation will be totally bankrupt,” he said.
Central Bank Governor Ajith Nivard Cabraal made public assurances that Sri Lanka could pay off its debts “seamlessly” but Wijewardena said the country was at substantial risk of defaulting on its repayments, which would have catastrophic economic consequences.
Meanwhile, Rajapaksa’s sudden decision in May to ban all fertiliser and pesticides and force farmers to go organic without warning has brought a formerly prosperous agricultural community to its knees as many farmers, who had become used to using – and often overusing – fertiliser and pesticides, were suddenly left without ways to produce healthy crops or combat weeds and insects. Many fearing a loss decided not to cultivate crops at all, adding to the food shortages in Sri Lanka.
The government made a dramatic U-turn in late October and farmers are now struggling to cover the high costs of imported fertiliser without help.
“The costs of cultivating paddy [wheat] have gone up astronomically … The government has no money for fertiliser subsidies. Many of us farmers are reluctant to invest money because we don’t know if we will make any profit,” said one farmer, Ranjit Hulugalle.
In an attempt temporarily to ease the problems and stave off difficult and most likely unpopular policies, the government has resorted to temporary relief measures, such as credit lines to import foods, medicines and fuel from its neighbouring ally India, as well as currency swaps from India, China and Bangladesh and loans to purchase petroleum from Oman. However, these loans provide only short-term relief and have to be paid back quickly at high interest rates, adding to Sri Lanka’s debt load.
Anushka Shanuka, a personal trainer, was among those who used to have a comfortable life but now is struggling to get by. “We can’t live the way we used to before the pandemic,” he said, saying the prices of vegetables had gone up by more than 50%.
A growing body of evidence indicates that the Omicron Covid variant is more likely to infect the throat than the lungs, which scientists believe may explain why it appears to be more infectious but less deadly than other versions of the virus. Six studies – four published since Christmas Eve – have found that Omicron does not damage people’s lungs as much as the Delta and other previous variants of Covid. The studies have yet to be peer-reviewed by other scientists.
“The result of all the mutations that make Omicron different from previous variants is that it may have altered its ability to infect different sorts of cells,” said Deenan Pillay, professor of virology at University College London.
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“In essence, it looks to be more able to infect the upper respiratory tract – cells in the throat. So it would multiply in cells there more readily than in cells deep in the lung. This is really preliminary but the studies point in the same direction.”
If the virus produces more cells in the throat, that makes it more transmissible, which would help to explain the rapid spread of Omicron. A virus that is good at infecting lung tissue, on the other hand, will be potentially more dangerous but less transmissible.
Researchers from the University of Liverpool’s Molecular Virology Research Group published a pre-print on Boxing Day that shows Omicron leading to “less severe disease” in mice, according to Prof James Stewart. The paper showed that mice infected with Omicron lose less weight, have lower viral loads and experience less- severe pneumonia.
“It’s one piece of the jigsaw,” he said. “The animal model does suggest that the disease is less severe than Delta and the original Wuhan virus. It seems to get cleared faster and the animals recovered more rapidly, and that ties in with clinical data coming through.
“The early indications are that it’s good news, but that’s not a signal to drop our guard, because if you’re clinically vulnerable, the consequences are still not great – there are deaths from Omicron. Not everyone can rip their masks off and party.”
The Neyts Lab at Leuven University in Belgium found similar results in Syrian hamsters, with a lower viral load in the lungs compared with other variants. Prof Johan Neyts said this may be because the virus was better at infecting humans than hamsters, or that it was more likely to infect the upper respiratory tract, or that it provoked less-severe disease.
A further pre-print, submitted to Nature last week by researchers in the US, also found that mice with Omicron lost less weight and had a lower viral load. And researchers at the University of Glasgow’s Centre for Virus Research have found evidence that Omicron has changed the way it enters the body. Omicron was substantially likely to evade the immunity of people who had had two doses of the vaccine, but a booster dose gave a “partial restoration of immunity”.
The slew of Christmas research builds on a study from the University of Hong Kong last month showing less Omicron infection in the lungs, and on research led by Prof Ravi Gupta at the University of Cambridge, whose team investigated blood samples from vaccinated patients. They found Omicron able to evade vaccines, but less able to enter lung cells.
The latest scientific research comes amid a debate about how best to carry out home-testing. Last week, some scientists suggested that lateral flow tests (LFTs) might be more accurate if people took swabs from the throat as well as the nose. Prof Jennifer Rohn at University College London said that her experience of using LFTs was that she had tested negative using nose swabs but positive when taking a sample from her throat.
That seemed to be supported by a study from South Africa showing that saliva samples subjected to PCR tests were better than nasal swabs at detecting Omicron.
However, Prof Lawrence Young, virologist at the University of Warwick, said the study was not significant enough for conclusions to be drawn. “This is a small study on acutely symptomatic, non-hospitalised patients. On the one hand it confirms previous studies indicating that salivary testing could be useful as a more easily performed sampling approach. I don’t think this study is significant enough to conclude anything about the behaviour of Omicron.”
As the US is seeing record numbers of daily coronavirus cases driven by the highly transmissible Omicron variant, public health authorities nationwide have said that teens and younger adults are helping fuel this increase.
The uptick in Covid-19 among the under-50s coincides with a surge in cases among young children – and a troubling increase in pediatric hospitalizations.
The US seven-day average for pediatric hospitalizations increased 58%, to 334, between 21 December and 27 December. The increase in hospitalizations for all age groups was about 19%. Less than 25% of US children are vaccinated, Reuters reported.
In Los Angeles county, adults between 18 and 49 accounted for more than 70% of the coronavirus cases recorded between 22 December and 28 December, according to the Los Angeles Times. The case rate per 100,000 people has surged most quickly in that age range.
The county saw more than 27,000 new cases on 31 December, dramatically surpassing the winter 2021 daily case average of 16,000. About 25% of all coronaviruses tests in Los Angeles county are positive, according to the newspaper.