impact of covid 19 on the sri lankan economy essay

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COVID-19 and the Sri Lankan Economy

COVID-19 has been rapidly spreading across the globe, taking thousands of lives and bringing hundreds of economies to a standstill. Its initial impact on China’s economy and China’s consequent slowdown may have adverse economic impacts on the rest of the world as well. This article examines the impact of COVID-19 on the Sri Lankan economy, focusing on the sectors such as national output and employment, tourism, exchange rate and financial market and social and welfare. 

The outbreak of critical diseases and pandemics cannot be predicted or controlled as yet. Severe acute respiratory syndrome (SARS) in 2003 and the Middle East respiratory syndrome (MERS) in 2012 are recognised as epidemics in recent history together with the most recent outbreak of the coronavirus, COVID-19. It was first identified in Wuhan, People’s Republic of China, in early January 2020. As confirmed by scientists. COVID-19 also belongs to the same family of coronaviruses which caused SARS and MERS in 2003 and 2012, respectively. However, the mortality rate of COVID-19 is approximately 4.3% (as of 24 March 2020) which is significantly lower than that of SARS (10%) and MERS (34%) (Abiad et al 2020). Nevertheless, the infection rate of COVID-19 (between 1.5% to 3.5%) outnumbered that of SARS and MERS and also Ebola (Abiad et al 2020).  The total number of confirmed cases of COVID-19 rapidly increased in China initially and then the rest of the world. In fact, the confirmed number of cases had surpassed the total of SARS by the end of February 2020 and currently, there are 170,444,706 (as of 30 May 2021) confirmed cases across 220 countries with a death toll of 3,544,083 (as of 30 May 2021). The outbreak spread to a vast number of countries in record time and the World Health Organization had announced a global emergency. 

Apart from the health consequences of COVID-19, there are many economic and social impacts of the pandemic which should be addressed sufficiently. Recalling history, SARS in 2003 cost $50 billion of the world’s output (Raga 2020) and the Asian Development Bank (ADB) has now estimated that global output may drop from $77 billion to $347 billion or by 0.1% to 0.4% of the global gross domestic product (GDP) (Abiad et al 2020). No doubt that China is the most adversely affected economy, approximately accounting for two-thirds of global GDP drop-down and the rest of the impact on the global economy is shared equally by developing countries in Asia and the rest of the world. The impact on China’s economy is more substantial through their stock markets, paused production and cancelled flights, and international travels. Currently, China is the second largest economy in the world and therefore China’s slowdown will adversely affect other countries as well. 

Impact on Sri Lanka’s GDP and Employment 

Sri Lanka has been maintaining strong economic and diplomatic ties with China since its independence. In particular, the bilateral economic relations between Sri Lanka and China have strengthened significantly during the last decade. Bilateral trade and investments agreements and tourism relations between the two countries are stronger than ever before. In fact, China is not a major export destination for Sri Lanka but China is the second largest source market for Sri Lanka in terms of imports and tourist arrivals. Therefore, China’s slowdown due to COVID-19 may have a significant impact on the Sri Lanka economy. The ADB recently estimated the economic impact of COVID-19 on selected economies considering the best case, moderate case, and worse case scenarios (Abiad et al 2020). 

Table 1 : Impact of COVID-19 on GDP and Employment of Sri Lanka

Source: Asian Development Bank.

As Table 1 indicates, the GDP of Sri Lanka may drop by 0.119%, 0.179% and 0.358% under best, moderate and worst hypothetical scenarios, respectively. Similarly, the shrinking of employment may vary from 0.205% to 0.617% under the same scenarios. Adverse effects on hotels, restaurants and other personal services are more substantial followed by transport services. However, these figures have been estimated only considering China’s domestic demand and travel bans and therefore the estimates may increase after incorporating the current situation in Sri Lanka. Especially, island-wide curfew due to COVID-19 completely disrupted economic activities while shutting down of airports and seaports interrupted export and import mechanisms extensively. Apart from that, COVID-19 has now outreached the United States (US), United Kingdom (UK) and other European countries as well. In fact, the European Union, UK and US are the main export destinations of Sri Lanka and, therefore, the demand for Sri Lanka exports is going to be severely affected. It is estimated that the export revenue from tea may drop by $520 million, while a $10 million reduction in the apparel sector (Gunadasa 2020). Hence, an overall drop of $750 million is expected during the second and third quarters of 2020 (Gunadasa 2020). Therefore, COVID-19 may have a larger impact on Sri Lanka’s GDP and employment than ADB forecasted.  

Impact on the Tourism Sector 

The tourism sector which is the third-largest foreign income generator for Sri Lanka has been severely affected by COVID-19. In fact, major tourist destinations in Sri Lanka have been suffering due to the travel bans which apply to domestic tourists also. China, which contributed the second largest number of tourists till January 2020, will most likely not be part of the top 10 countries with the most tourist arrivals in Sri Lanka in 2021. Specifically, 54,452 Chinese tourists had visited Sri Lanka during January–February of 2019, and Chinese tourist arrivals dropped down to 24,459 during the same period in 2020, reporting a 55.1% drop in Chinese tourist arrivals and which has drastically dropped down to 144 during the same period in 2021 (SLTDA 2020–21).

Table 2: Tourist Arrivals from Top 10 Countries

Source: Monthly Tourist Arrivals Report, February 2020, Sri Lanka Tourism Development Authority. 

Table 2 highlights the tourist arrivals from the top 10 tourist markets in February 2019 and February 2020 along with a comparison with April 2020. With the declining trend of Chinese tourist arrivals due to COVID-19, the UK, Russia and Germany have become the topmost countries providing tourists to Sri Lanka after India. Nevertheless, the majority of European countries are suffering from COVID-19 and, therefore, the tourism sector of Sri Lanka has been dramatically affected, especially after losing tourists from European countries. In the immediate aftermath of the pandemic, that is in April 2020, tourist arrivals saw a significant decline. Further, tourist arrivals from all the top markets dropped from 84% to 100% by 2021 when compared with the 2019 figures for the same. As a result, Sri Lanka’s total tourist arrivals during the period between January to April 2021 have dropped by 97.3% compared to the same period in 2020. Consequently, the contribution of the tourism sector to Sri Lanka’s economy declined sharply in 2020.  

Pressure on Exchange Rate and Financial Market 

Decreased tourism receipts, reduced export earnings and outstanding foreign debt payments essentially increase the pressure on the foreign exchange rate. Apart from that, a considerable number of Sri Lankans, employed in the Middle East, South Korea and Italy, are severely affected by the pandemic. Thus, it is expected that foreign remittances to Sri Lanka will drop by $2.7 billion during this year (Gunadasa 2020). Thus, the Sri Lankan rupee started to depreciate against major currencies from the first week of March 2020. In particular, it depreciated against the US dollar and reached Rs 198.46 (As of 30 May 2021) reporting one of the highest depreciation in its history. The current depreciation of the rupee essentially increases the country’s expenditure on imports and burden on foreign debt. Hence, the Central Bank of Sri Lanka has immediately taken a few measures 1 such as suspension of the import of motor vehicles, non-essential goods and purchasing of Sri Lankan international sovereign bonds by licenced banks in Sri Lanka. However, no immediate response can be seen as yet in the exchange rate.  

COVID-19 has now caused global financial unrest as well and it is more apparent through the collapse of stock markets in many countries around the world. In fact, Sri Lanka has no escape from the crisis and Colombo Stock Exchange (CSE) in Sri Lanka has also been affected severely. On 10 March, CSE fell to an eight-year low and it was one of the largest one-day falls, due to an outflow of foreign funds (News First 2020a). A considerable volume of treasury bills and treasury bonds held by foreign investors has declined by 9.03% (that is, Rs 8.236 billion) bringing the total to Rs 19.6 billion in foreign outflows during the first two weeks of March 2020 ( News First 2020b). Consequently, CSE closed on a negative note during the first two weeks of March with a 4.47% decrease in the All Share Price Index (ASPI) and a 5.79% decrease in the S&P Sri Lanka 20 index compared to the end of February 2020 ( News First 2020b). Moreover, CSE fell by 16% since January 2020 and 8.4% out of 16% fall was in February itself ( News First 2020a). There is a greater possibility of further weakening the stock market damaging the financial stability of the country with rapid outreach of the coronavirus globally and also in Sri Lanka.

Welfare Measures Implemented by the Sri Lankan Government

The Sri Lankan government has implemented a variety of strategies to control COVID-19 by allocating financial and non-financial resources extensively. Sri Lanka continues to maintain a large number of quarantine centres with many hotels and a few public places converted as quarantine centres. Maintaining such quarantine centres and facilitating suspected patients in the centres requires huge additional funding, which ultimately affects the budget deficit through increased welfare expenditure. However, the additional funding requirements cannot be compensated in the current situation and therefore will have adverse economic impacts in the long run. 

In particular, the President has allocated Rs 100 million to a special bank account opened by the Bank of Ceylon in order to help COVID-19 patients. Moreover, the President has pledged to donate $5 million to SAARC COVID-19 Emergency Fund to lend a helping hand to the regional counterparts ( News.lk 2020a). Apart from that, the government of China agreed to provide a concessionary loan of $500 million with a term of 10 years in order to strengthen Sri Lanka’s financial position to battle with COVID-19 ( News.lk 2020b). However, the long-term impact of such welfare measures should be addressed appropriately to avoid a possible economic downturn in the near future.

Lastly, the government’s decision to impose an island-wide curfew helped in controlling the pandemic. However, the livelihoods of low-income groups were adversely affected due to the imposition of this curfew. Particularly, casual workers and workers who are employed in the informal sector are temporarily unemployed and are struggling to make ends meet. Government policy should potentially help in providing a safety net to these groups as well.

[1] Refer to Central Bank of Sri Lanka (2020).

Abiad, Abdul, Mia Arao, Suzette Dagli, Benno Ferrarini, Ilan Noy et al (2020): “The Economic Impact of the COVID-19 Outbreak on Developing Asia,” ADB Briefs , No 128, https://www.adb.org/sites/default/files/publication/571536/adb-brief-128-economic-impact-covid19-developing-asia.pdf.

Central Bank of Sri Lanka (2020): “The Central Bank of Sri Lanka Introduces Urgent Measures to Ease the Pressure on the Exchange Rate and Prevent Financial Market Panic due to the COVID-19 Pandemic,” https://www.cbsl.gov.lk/en/news/the-central-bank-of-sri-lanka-introduces-urgent-measures-to-ease-the-pressure-on-the-exchange-rate-and-prevent-financial-market-panic-due-to-the-covid-19-pandemic.

Gunadasa, S (2020): “Sri Lankan Government Responds to COVID-19 by Mobilising the Military and Helping the Financial Elite,” World Socialist Website, https://www.wsws.org/en/articles/2020/03/18/sril-m18.html. 

News First (2020a): “CSE Falls to 8 Year Low,” 10 March, https://www.newsfirst.lk/2020/03/10/cse-falls-to-8-year-low/.

—(2020b): “Economic Impact of Covid-19 on Sri Lanka,” 9 March, https://www.newsfirst.lk/2020/03/09/economic-impact-of-covid-19-on-sri-lanka/.

News.lk (2020a): “President Provides Relief Package in the Face of COVID-19—All Relief Effective from Today,” 23 March, https://www.news.lk/news/political-current-affairs/item/29846-president-provides-relief-package-in-the-face-of-covid-19-all-relief-effective-from-today.

—(2020b): “Sri Lanka and China Signs Agreement for US$ 500 Million Concessionary Loan,” 19 March, https://www.news.lk/news/politics/item/29778-sri-lanka-and-china-signs-agreement-for-us-500-million-concessionary-loan.

Raga, S (2020): “Economic Vulnerabilities to the Coronavirus: Top Countries at Risk,” Overseas Development Institute, 5, https://odi.org/en/insights/economic-vulnerabilities-to-the-coronavirus-top-countries-at-risk/ 

SLTDA (2020–21): “Monthly Tourist Arrival Reports,” Sri Lanka Tourism Development Authority, https://sltda.gov.lk/en/monthly-tourist-arrivals-reports-2021. 

Worldometers (2019): COVID-19 Coronavirus Pandemic, https://www.worldometers.info/coronavirus/#countries. 

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Impact on Covid 19 on the Sri Lankan Economy

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Sri Lanka Development Update: Economic and Poverty Impact of COVID-19

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As Sri Lankan Economy Recovers, Focus on Competitiveness and Debt Sustainability Will Ensure a Resilient Rebound

COLOMBO, SRI LANKA, April 9, 2021 — Despite the heavy toll of the COVID-19 pandemic on Sri Lanka’s economy and the lives of its people, the economy will recover in 2021, though challenges remain, says the latest World Bank Sri Lanka Development Update: Economic and Poverty Impact of COVID-19 released today.

The Sri Lanka Development Update (SLDU) notes that the country, hit with an unprecedented economic downturn due to the pandemic, is now on the road to recovery. Sri Lanka’s economic growth is expected to recover to 3.4 percent in 2021, mainly due to foreign investments as well as normalizing tourism and other economic activities. However, the slow global recovery, coupled with continued trade restrictions, economic scarring from the slowdown, and the high debt burden may continue to affect growth.

The report provides an update on Sri Lanka’s economy and outlook, highlighting the devastating impact of the pandemic. Sri Lanka’s economy contracted by 3.6 percent in 2020, the worst growth performance on record, as is the case in many countries fighting the pandemic.

Government acted decisively with steps such as cash transfers and postponed tax payments. The Central Bank’s introduction of a debt moratarium and other measures to encourage lending also helped reducing the adverse impact of COVID-19 on businesses and livelihoods. At the same time, increased expenditures and lower revenues amid the pandemic contributed to a deterioration of the fiscal situation. Public and publicly guaranteed debt is estimated to have increased to 109.7 percent of GDP. Reserves declined to an 11-year low in February 2021, and the exchange rate depreciated by 6.5 percent from January through March 17, 2021. Striking a balance between supporting the economy amid COVID-19 and ensuring fiscal sustainability remains a key challenge.

“As in countries around the world, COVID-19 has had an unprecedented impact on Sri Lanka’s economy and people’s livelihoods. But we are already seeing positive signs as the country enters the recovery phase,” said Faris H. Hadad-Zervos, the World Bank Country Director for Maldives, Nepal and Sri Lanka. “Through an enhanced focus on an export-oriented growth model that taps the full potential of private investment, Sri Lanka could increase its competitiveness and raise growth in a sustainable manner.”

The Update includes a special focus section, which discusses the impact of COVID-19 on poverty. With jobs lost and earnings reduced, especially in urban areas and among private sector employees and informal workers, the $3.20 poverty rate is projected to have increased from 9.2 percent in 2019 to 11.7 percent in 2020.

The report notes that the current social protection system could support the reintegration of those who lost their jobs. It suggests that a more targeted social safety nets could help the authorities to scale up support to the poor and vulnerable quickly and effectively in times of crises. Investments in digital technologies and literacy can also help Sri Lankans find new economic opportunities.

The Sri Lanka Development Update is a World Bank publication that discusses the country’s recent macroeconomic developments and outlook, as well as relevant development challenges. It also provides a more in-depth examination of selected economic and policy issues.

The Sri Lanka Development Update is a companion piece to the South Asia Economic Focus, a twice-a-year World Bank report that examines economic developments and prospects in the South Asia region and analyzes policy challenges faced by countries. The Spring 2021 edition titled South Asia Vaccinates, launched on March 31, 2021, shows that economic activity in South Asia is bouncing back, but growth is uneven, recovery remains fragile, and the economic outlook is precarious. The report also focuses on the different dimensions of vaccine deployment and provides a cost-benefit analysis of vaccination in the region.

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The Impact of COVID-19 on Financial Markets and A Closer Look at Sri Lanka

May 29, 2020        Reading Time: 7 minutes

Reading Time: 7 minutes

Image Credits: Markus Spiske/Unsplash

* Angela Huettemann

The spread of COVID-19 has kept investors around the world in suspense since February, when financial markets started their slide. Since then, markets have been subject to high levels of volatility, divestments, and flight into ‘safer haven assets’. 1 Political leaders have titled the spread of COVID-19 the ‘biggest challenge since World War II’, while the IMF forecasts the ‘great lockdown’ as the ‘worst economic downturn since the great depression’. This Blog will look more closely at financial market responses to the spread of COVID-19 , paying special attention to Emerging Markets and Sri Lanka. 2 This Blog further assesses potential ways on how to bolster domestic and foreign investor sentiment in the Sri Lankan stock market in the short- and longer-term.

Developed Markets

Uncertainty and worries over a prolonged global economic downturn following the global spread of COVID-19 and the subsequent lockdown of countries have triggered a synchronised sell-off in equities and commodities in February and March 2020. Stock markets of advanced economies recorded their worst losses since the financial crisis in 2008, with many of them entering bear market territory (indicated by a more than 20% slump in index values). The fall in equities was further exacerbated by plunging oil prices, which sparked additional fears over a looming global economic downturn. The MSCI World Index, which reflects stock market movements of 23 developed economies, fell by more than 34% from peak to trough in little more than a month, down to its lowest level since July 2016. (Figure 1).

An indicator of risk sentiment and heightened uncertainty, Chicago’s Board Options Exchange Volatility Index rose to its highest ever recorded level in history on 20 th March. 3 In a ‘ flight to quality ’, assets such as Gold and the US Dollar recorded new highs, after a temporary fall at the beginning of March. 4 What’s more, bond yields fell (indicating that prices rose), highlighting investors’ preference for perceived ‘safer haven assets’.

Governments and Central Banks reacted quickly to the market turmoil and launched manifold support programmes for businesses, households, and the financial system. Various Central Banks, including the Federal Reserve and Bank of England, cut policy interest rates and started bond purchasing programmes, providing additional liquidity for the financial system. Following the wide-ranging stimuli, markets have started recouping parts of their losses since the end of March. More recently, heightened hopes over encouraging signs of a potential COVID-19 vaccine from Japan and statements by Federal Reserve Chair Jerome Powell on the possibility of further easing measures provided an additional boost to the market. 5 Whether or not the bear market will be short-lived, or a longer-term reality will depend on a combination of various factors, such as the geographic spread of Coronavirus, development of case numbers, the duration of the lockdown, and respective stimulus measures employed.

 Note: LKI calculations based on Morgan Stanley Index Data 2020. Information as at 21 May 2020.

Emerging Markets

Emerging Markets face additional challenges with regards to containing the pandemic and its impact on society and economy against limited fiscal scope to implement fiscal stimulus, more fragile health systems and less developed social safety nets. What’s more, the fall in commodity prices such as oil and copper, which exporting countries such as Nigeria, Chile, and Brazil depend on, mean a significant loss in foreign exchange earnings to bolster local exchange rates. 7 Further, countries such as Bangladesh and Mexico, are affected by impeded global supply chains. Turkey, Thailand, the Maldives, and Sri Lanka suffer from a fall in tourism, also putting a strain on exchange earnings. 8

Reflective of this, investor preferences have shifted towards safer haven assets, which has been felt dearly by emerging economies. According to Bloomberg, more than 25% of local currency debt is owned by foreigners in Emerging Markets, increasing vulnerability to capital flight. 9 In March alone, an estimated total of US$ 83 billion capital 10 has been withdrawn from Emerging Markets, more than during any month of the financial crisis. 11 The flight of capital increases pressure on Emerging Market economies, as it limits government interventions and weighs on the local currency. Many economies, such as Mexico, South Africa, and Indonesia, have seen their currencies depreciate during the spread of COVID-19, increasing costs of foreign-currency-denominated debt repayments, further fuelling investor concerns. In reverse, the Dollar Index has climbed to new highs in March.

Against these challenges, the MSCI Emerging Markets Index fell by 31% between 19 th February and 23 rd March. Ever since, investor sentiment has improved slightly, providing tailwind to the market’s recovery. (Figure 1).

Sri Lanka’s Market

The spread of COVID-19 puts additional strain on Sri Lanka, a small open economy with limited fiscal scope to combat the pandemic. That said, the government has employed wide-ranging measures to curb the spread, and cushion the impact on businesses and people, aided by multilateral agencies and support from China, the United States, the EU, Canada, and India.

Similar to other emerging economies, worries over an economic slowdown in Sri Lanka , led to a sell-off in the financial market and capital outflows. In less than two months 12 the country witnessed a 70% outflow of foreign-owned T-bills and T-bonds (US$ 372 million or 0.42% of GDP) 13 , whilst the Sri Lankan Rupee depreciated by 5.3% over the same time frame. 14 The CSEALL Price Index, Sri Lanka’s leading stock market index, fell to its lowest level in eight years on 12th May. Previously, trading had been suspended to restrict panic selling. Ever since, the market has increased 13.1% , leading to a Year-To-Date return of -21.6%. 15

As with global financial markets, the recovery of Sri Lanka’s stock market is directly linked with the business environment and will depend on a variety of factors, such as the duration of lockdowns, the success of stimulus measures, as well as investor, business and consumer sentiment. These factors will largely determine if COVID-19 will lead to 1) a shorter-term economic slow-down with economic recovery setting in once Sri Lanka eases out of lockdown, triggering a relaxation of Sri Lanka’s stock market or 2) longer-term subdued economic growth, with the financial market staying in bear territory for a prolonged period of time.

Opportunities for the Development of Sri Lanka’s Stock Market

Fast-tracking the recovery of Sri Lanka’s stock market yields an important opportunity to mobilise additional foreign as well as local capital, which provides an important source of funding for local companies to recover from the pandemic.

In the short-term , the Sri Lankan government has the potential to provide additional support for businesses to help cushion the impact of COVID-19 on their operations. A recent poll of 200 Sri Lankan CEOs revealed that supportive measures such as the debt moratorium for interest and capital payments as well as selective low cost working capital financing should be extended to all economic sectors to alleviate financial pressures on businesses. 16 Further, the government should seek to support the Sri Lankan Stock Exchange 17 in requesting listed companies to provide disclosure of COVID-19 impact on their current and future business operations. Making public the impact of the virus on their business operations and any counter measures which have been employed are of material importance for investment decisions.

Longer-term , the Sri Lankan government has the potential to drive stock market development, by lifting size and liquidity constraints of the Sri Lankan stock market. In comparison to regional peers, Sri Lanka’s market is small in size and less liquid, both important investor criteria which keep large institutional or foreign investors at bay. As such, listing key privately-owned and state-owned enterprises would expand the size of the stock market and increase investor interest. To increase liquidity, pension reforms should allow professional portfolio managers to manage pension funds (such as EPF and ETF) to offer a more diversified basket of investment opportunities, tailored to investor’s risk appetite and preferences. The associated surge in demand for equities and securities will in turn increase market liquidity . 18 Further, targeted promotional campaigns such as the 2015 ‘Invest in Sri Lanka’ forum will help raise international awareness and investor interest in Sri Lanka’s stock market. The domestic stock market provides diversification benefits for investors, as it has historically shared a low correlation with other major markets such as the US. 19 It offers a comparatively low P/E ratio to other emerging economies and thus an attractively-priced entry point for investors searching to diversify their portfolio. These features need to be marketed to domestic and international investors.

Ultimately, the above efforts need to be complemented by a national financial market development plan, which encompasses commitment from all key parties such as the Colombo Stock Exchange, Central Bank of Sri Lanka, Securities and Exchange Commission, and the Ministry of Finance. Structural and policy reforms are required to establish an effective financial system with a more broad-based financial market.

COVID-19 is likely to reinforce trends which have established themselves in the past. As such, it presents an excellent opportunity to revisit underlying issues of Sri Lanka’s stock market, which keep investors at bay, and may provide additional momentum for necessary stock market reforms.

1 Assets, which are believed to retain or increase in value during turbulent times and therefore limit investor exposure to losses in case of a market downturn.

2 Gopinath, G. (2020). The Great Lockdown: Worst Economic Downturn Since the Great Depression . IMF Blog [Online]. Available at: https://blogs.imf.org/2020/04/14/the-great-lockdown-worst-economic-downturn-since-the-great-depression/ [Accessed 22 April 2020]; Petzinger, J. (2020). Germany’s Merkel says COVID-19 is the ‘biggest challenge since WWII’ in rare national address . Yahoo!Finance. [Online] Available at: https://uk.finance.yahoo.com/news/merkel-calls-covid-19-the-biggest-challenge-since-wwii-in-rare-tv-address-to-germany-184926108.html [Accessed 22 April 2020].

3 Bloomberg. (2020). VIX:IND – Chicago Board Options Exchange Volatility Index . [Online] Available at: https://www.bloomberg.com/quote/VIX:IND [Accessed 20 April 2020]; Li, Y. (2020). Wall Street’s fear gauge closes at highest level ever, surpassing even financial crisis peak . CNBC. [Online] Available at: https://www.cnbc.com/2020/03/16/wall-streets-fear-gauge-hits-highest-level-ever.html [Accessed 20 April 2020].

4 Bloomberg. (2020). DXY:CUR – Dollar Index Spo t. [Online] Available at: https://www.bloomberg.com/quote/DXY:CUR [Accessed 24 April 2020]; Bloomberg. (2020). XAU:CUR – Gold Spot $/Oz . [Online] Available at: https://www.bloomberg.com/quote/XAU:CUR [Accessed 20 April 2020].

5 The Guardian. (2020). Markets surge amid Covid-19 vaccine hopes and Fed’s stimulus pledge – as it happened . [Online] Available at: https://www.theguardian.com/business/live/2020/may/18/markets-rally-federal-reserve-powell-vaccine-japan-recession-ftse-business-live [Accessed 22 May 2020].

6 Morgan Stanley Index Data. (2020). End of Day History – Data . [Online] Available at: https://www.msci.com/end-of-day-history?chart=regional&priceLevel=0&scope=R&style=C&asOf=Mar%2030,%202020&currency=15&size=36&indexId=106 [Accessed 16 April 2020].

7 Walker, A. (2020). Developing world economies hit hard by coronavirus . [Online] BBC. Available at: https://www.bbc.com/news/business-52352395 [Accessed 30 April 2020].

8 Hecking, C. (2020). Kapitalflucht aus Schwellenländern stärker als zur Weltfinanzkrise 2008 . [Online] Spiegel. Available at: https://www.spiegel.de/wirtschaft/soziales/corona-krise-kapitalflucht-aus-schwellenlaendern-staerker-als-zur-weltfinanzkrise-2008-a-42132876-7473-4dba-94de-5306e8a60809 [Accessed 30 April 2020].

9 Ashworth, M. (2020). Emerging Markets are Peering Over the Precipice . [Online] Bloomberg Opinion. Available at: https://www.bloomberg.com/opinion/articles/2020-04-07/coronavirus-emerging-markets-are-peering-over-the-precipice [Accessed 20 April 2020].

10 Fortun, J. & Hilgenstock, B. (2020). IIF Capital Flows Tracker – April 2020 – The COVID-19 cliff . Institute of International Finance. [Online] Available at: https://www.iif.com/Portals/0/Files/content/1_IIF_Capital%20Flows%20Tracker_April.pdf [Accessed 23 April 2020].

11 US$53 billion in bonds, US$30 billion in equities.

12 Central Bank of Sri Lanka. (2020). Weekly Economic Indicators – 17th April 2020 . [Online] Available at: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/statistics/wei/WEI_20200417_e.pdf [Accessed 20 April 2020]; Central Bank of Sri Lanka. (2020). Weekly Economic Indicators – 20th February 2020 .  [Online] Available at: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/statistics/wei/WEI_20_02_2020_E.pdf [Accessed 20 April 2020].

13 Between 19th February and 15th April.

14 Bloomberg. LKR:CUR – Sri Lankan Rupee Spot . [Online] Available at: https://www.bloomberg.com/quote/LKR:CUR [Accessed 20 April 2020].

15 Bloomberg. CSEALL:IND – CSE ALL INDEX . [Online] Available at: https://www.bloomberg.com/quote/CSEALL:IND [Accessed 22 May 2020].

16 Daily Financial Times. (2020). Top CEOs share wish-list for how SL can emerge stronger post-COVID-19 . [Online] Available at: http://www.ft.lk/top-story/Top-CEOs-share-wish-list-for-how-SL-can-emerge-stronger-post-COVID-19/26-699092 [Accessed 23 April 2020].

17 Daily Financial Times. (2020). CSE requests listed firms to disclose COVID-19 impact . [Online] Available at: http://www.ft.lk/front-page/CSE-requests-listed-firms-to-disclose-COVID-19-impact/44-699043 [Accessed 24 April 2020].

18 Samarakoon, L. (2016). Sri Lanka Capital Market Assessment. Asian Development Bank. [Online] Available at: https://www.adb.org/sites/default/files/project-document/202066/49365-002-tacr-01.pdf [Accessed 24 April 2020].

19 Preis, R. (2019). Sri Lanka’s Market: An Investment Gem Hidden In Too Much Pessimis m. Forbes. [Online] Available at: https://www.forbes.com/sites/rainermichaelpreiss/2019/08/07/sri-lankas-market-an-investment-gem-hidden-in-too-much-pessimism/#19a167255df6 [Accessed 22 April 2020].

* Angela Huettemann is a Research Fellow at the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI) in Colombo. The information in this blog is as at 22nd May 2020. The opinions expressed in this article are the author’s own views. They are not the institutional views of LKI, and do not necessarily represent or reflect the position of any other institution or individual with which the author is affiliated.

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Sri Lanka’s Financial Crisis: Origins, Impact, and Next Steps

Sri Lankans organize a protest against the Rajapaksa government.

By Raghav Nath, MBA ’22

Sri Lanka finds itself in a financial crisis that has led to a rise in external debt, depleted foreign exchange reserves, a currency in freefall, and high, double-digit inflation. I will look at some of the factors that have contributed to the nation’s economic downfall, including consolidation of political power, hyper-populist policies, and an ill-thought push towards organic agriculture. Further, I will evaluate the impact that the situation has had on the nation in the form of political instability, shortages of essential items, galloping inflation, and disgruntled citizens.

How did Sri Lanka get here?

Sri Lanka has had economic trouble for the greater part of the last decade. It received a bailout from the International Monetary Fund (IMF), in 2009 and again in 2016, on the condition that it would control its debt and reduce it to 5 percent of its GDP by 2021. The situation worsened due to the twin impacts of the 2019 Easter bombings and Covid-19 on tourism, one of Sri Lanka’s main industries, accounting for approximately 10 percent of its GDP. Below are some of the key events and policy shifts that led Sri Lanka into the economic turmoil it faces today.

• Consolidation of political power | The Gotabaya Rajapaksa government first came to power in 2019, forming a caretaker government until the 2020 parliamentary elections, when Rajapaksa won a landslide victory as president, and his party, Sri Lanka Podujana Peramuna (SLPP), secured 145 out of 225 seats. This landslide victory allowed Rajapaksa to appoint members of his family to key posts including that of a prime minister and finance minister. Rajapaksa also initiated constitutional reforms that gave the incumbent government the ability to hire and fire judges and other members of the judiciary, further consolidating power and paving the way for major policy changes.
• Hyper-populist policies | The Rajapaksa government enacted populist policies, including massive tax breaks, that had an adverse effect on government revenue. The Goods and Services (GST) tax rate was slashed in half from 15 percent to 8 percent. Additionally, the government also cut the income tax by increasing the taxable income band by 600 percent from 500,000 Sri Lankan Rupees (SLR) to 3,000,000 SLR. This resulted in a 33.5 percent decrease in the number of tax payers. The loss of revenue to the Sri Lankan government was estimated at 2 percent of GDP. The reduced revenue to the government hindered its path towards lowering its percent of debt of the GDP and instead increased it, resulting in even higher interest payments.
• Organic agricultural methods | The government in Sri Lanka ordered a shift to organic methods of farming. They did this in a relatively short amount of time and in a very stringent manner, without rolling out support and help for the farmers to assist them in the change. What followed was a sharp reduction in output in agricultural items such as rubber and tea. Due to reduced output, Sri Lanka had to stop exporting these items and instead import them to ensure enough quantity to sustain domestic demand. This led to a negative impact on its balance of payments and increased debt that further weakened its currency, which in turn made these imports even more expensive. Sri Lanka was caught in a vicious cycle of rising debt and rising interest payments due to the mismanagement of its economy.

What impact has the crisis had on Sri Lanka?

The economic crisis has had a crippling effect on the country, with shortages of essential goods, high inflation, and more, leading to mass protests and resignations from the president’s cabinet.

• Shortages of essential goods | Sri Lanka has faced acute shortages of essential items such as fuel and medicines as it struggles to import goods due to its precarious foreign exchange reserves and mounting debt. This has had a compounding impact on the island nation as tourists have stayed away from the country amidst the fallout from the situation. Since tourism accounts for approximately 10 percent of Sri Lanka’s GDP, the failure to see an uptick in tourism following the easing of the Covid-19 pandemic has hit the country hard.
• High inflation | The country has struggled with high inflation owing to the vicious debt trap that it has found itself in. As a result, the interest payments on sovereign debt and the cost of imports have been rising steadily. The increase in inflation has hit every stratum of society hard, but has hit those with the lowest incomes the hardest.

What steps can Sri Lanka take to alleviate the situation?

Resumption of imports that help tackle the shortages of essential goods seems to be of the utmost importance. Without essential medicines, fuels, and food grains, any attempt to return to a state of normalcy will be futile. However, this will only be possible after it refinances its debt and gets a bailout either from its neighboring countries or the IMF. Without this, it will not be able to afford imports.

Sri Lanka estimates that it needs USD 1.5 billion to tide over the crisis immediately and resume its imports of essential items. An IMF bailout that mandates resumption of non-organic ways of farming, cutting back populist tax regimes, and increasing government revenue through more efficient tax collection will not only help the country in the short term but will also lay the foundation to build its future.

About Raghav Nath, MBA ’22

Raghav Nath is a second-year student in the Two-Year MBA program at the Samuel Curtis Johnson Graduate School of Management . He grew up in India and takes a keen interest in South Asian geopolitics. Nath is passionate about fintech and the application of technology to increase financial inclusion in the emerging economies. Upon graduation, he will be joining Fireblocks, a cryptocurrency infrastructure provider, to help promote the adoption of cryptocurrency by institutions.

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Sri Lanka's fight against COVID-19: a brief overview

Sri Lanka was endorsed by the World Health Organization as a country that made immense progress in controlling the COVID-19 pandemic. This chapter focuses on the health-care structure, strategic use of Police, Tri-forces, and other government entities, media support, traditional social practices, the public responsiveness, and even the geographic location of the country that contribute to the overall control of the pandemic and management of the disease plausibly. Despite the nearly successful achievement, the country has faced economic, political, and social challenges during this critical period, through which many lessons are learnt. Sri Lanka has had few H1N1 outbreaks in the recent past. However, till the spread of COVID-19, the current population had not experienced the spread of a highly contagious disease in the country. Therefore, this chapter aims to share the novel experience, strategies used, challenges faced, and ways adapted in confronting COVID-19 as a country.

1. Introduction

The pandemic, Coronavirus disease 2019 (COVID-19) caused by Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2 virus) is among the deadliest events happened to the humankind in the recent history. The pandemic has triggered devastating effects on economic and sociopolitical conditions of tens of millions of people. Owing to the novelty of the virus, the development of remedial measures including vaccines posed many challenges. Thus, people had to adhere to many, mostly previously unpracticed precautionary measures including extensive hand washing, wearing masks, and social distancing. The spread of the disease was rapid and exponential in many regions severely affecting the day-to-day lives of people.

Sri Lanka is a tropical island in the Indian Ocean with an estimated population of 21,919,000 ( Department of Census and Statistics, Sri Lanka, 2020 ). Population density is highest in the Western Province of the country, especially concentrated in and around the capital city, Colombo. Large crowds enter Colombo on a daily basis or seek temporary accommodation in Colombo or suburbs as many government and private offices, best hospitals, leading schools, several large state universities, free trade zones, the main seaport, and the prime airport of the country are situated in the Western Province. Sri Lanka being a popular tourist destination, earns a large amount of foreign exchange from the tourism industry; thus, its economy relies heavily on tourism ( Ranasinghe & Sugandhika, 2018 ). The apparel industry also contributes largely to export income catering to the high-end US and European markets. The livelihood of a substantial portion of the population hence depends directly or indirectly on tourism and the apparel industry. Yet another considerable majority depends on agricultural industries, as producers, processors, retailers, or at a different scale in the market chain.

The main economic challenges faced by Sri Lanka as a country in the past few decades were the civil war, the tsunami, and the most recent Easter Sunday attack in 2019. COVID-19 pandemic hit Sri Lanka at a time the country was grappling to recover from the loss of the Easter Sunday attack in April 2019. The health sector of Sri Lanka is at a reasonably plausible level for a middle-income country. Sri Lanka ranked 73 rd among 195 countries for personal health-care access and quality, being fairly ahead of other South Asian countries ( Barber et al., 2017 ). Therefore, the state health sector was vigilant and ready to take up the health challenge of COVID-19. The Tri-forces, the Police, and government administrative workers are other main forces that strengthen and support the health-care sector in Sri Lanka throughout this mission. The cooperation and the commitment of the private sector and the public also play a pivotal role in succeeding the COVID-19 battle.

The very first COVID-19 case from a Sri Lankan citizen was reported on March 11, 2020 ( Ediriweera et al., 2020 ), and the second after 2 weeks. Since then, the number of cases increased very slowly, not more than 10 patients on most days up to mid-April 2020. Besides the three to four spikes reported due to clusters from quarantine centers, a Navy base, and a rehabilitation center, the numbers remained in a range of 0–30 up to early October 2020 ( Epidemiology Unit, 2020a ). This period was considered the first COVID-19 wave in the country. The second COVID-19 wave hit the country harder than the first, just when the society was adopting the “New normal” life. The disease pattern and the trend were dissimilar to the first wave, where the daily numbers became 10–20 times higher by December 2020 ( Epidemiology Unit, 2020b ), supposedly due to different strategies adopted by the Government keeping in line with new global knowledge about the pandemic. Despite the recent increase in positive cases, the death rate of Sri Lanka is at 0.48% which is considerably lower than the global rate: 2.14% ( Sri Lanka Health Promotion Bureau Website Dashboard, 2021 ). Several factors such as the robust health-care structure, strategic use of Police, Tri-Forces and other government entities, media support, traditional social practices, the public responsiveness, and the geographic location of the country have contributed largely for the control of the pandemic and management of the disease in the country.

2. The health-care structure of Sri Lanka

Sri Lanka's health-care system comprises allopathic, traditional, Ayurveda, Yunani, Siddha, homeopathy, and acupuncture practices ( Ministry of Health and Indigenous Medical Services, 2020a ). Allopathic or Western medical service is largely available via public and private sector service providers. Public allopathic care is provided by a robust network spanning across the country. Most importantly the public health-care sector is commonly accessible for the entire population free of charge. Private allopathic services provided at a cost are concentrated in metropolitan areas, enhanced by modern equipment and facilities ( Perera & Perera, 2017 ). They attract the more modernized and economically sound fraction of the public. Nevertheless, the majority of the population seeks inpatient care primarily in the public sector. Twenty four million patients have been implicated to benefit through routine health clinics conducted at these facilities in 2014 ( Perera & Perera, 2017 ). Moreover, the public sector offers Ayurvedic care free of charge to the public through regional Ayurveda hospitals/centers although the network is as not as much expanded as of the Western health-care structure. The private sector is also involved in providing Ayurveda, traditional Sri Lankan, and other conventional medical care. Most importantly, the private health-care institutions in Sri Lanka are regulated by the Private Health Regulatory Council (PHRC) while the conventional medical services are also regulated under different authorities to a great extent.

2.1. The state health sector

The state health sector caters to the nation in two main aspects; a) providing curative care services ranging from nonspecialized primary care to specialized care delivered through hospitals of different grades, and b) providing community health services focusing on promotive and preventive health. The curative care institutions are of three levels: tertiary care institutions (National Hospital of Sri Lanka, Teaching Hospitals, and Provincial General Hospitals), secondary care institutions (District General Hospitals and Base Hospitals (Type A, B)), and primary care institutions (Divisional Hospitals (Type A, B, C)) and primary medical care units ( Ministry of Health and Indigenous Medical Services, 2020a ). The management of the National Hospital and 21 teaching hospitals is driven by the Ministry of Health while the provincial councils are given the authority to manage other hospitals.

An excellent set of community health services are offered to the public through the Medical Officer of Health (MOH) offices, which are divisional health units, formed to reach almost all families throughout the country ( Perera & Perera, 2017 ). Their prime focus is on maternal and child health, followed by communicable and noncommunicable diseases. As of 2018, 353 MOH offices have been functioning across the country ( Ministry of Health and Indigenous Medical Services, 2020a ). These units are managed by a medical doctor and supported by public health field staff, mainly consisting of Public Health Inspectors (PHIs) and Public Health Midwives (PHMs). The central authority of all public health services, however, lies on the Ministry of Health, and it is responsible for the provision of trained human resources, drug supply, and major infrastructure developments for all hospitals in the country. The effectiveness of this well-structured health-care system is clearly evident by its credible health indicators ( Ministry of Health and Indigenous Medical Services, 2020a ).

2.2. Excellence in disease management and surveillance

Before the emergence of COVID-19, Dengue was the most challenging public health concern in Sri Lanka ( Tissera et al., 2020 ). Due to the high receptivity and the vulnerability to the disease, and the major Dengue outbreak in year 2004, Sri Lanka has established a dedicated unit for Dengue control: the National Dengue Control Unit, and a Presidential task force on dengue control headed by the President. Despite the lapses in vector control, disease management is well under control having skilled practitioners in the state hospitals and elaborate disease management guidelines set up by the authorities. Sustaining the Malaria-free status since 2012 further explains the strong and continuous disease surveillance system in Sri Lanka. However, Sri Lanka had not experienced any pandemic in the recent past.

2.3. Initial responses to COVID-19 disease management

The first COVID-19 patient, a foreign national, was reported from Sri Lanka in late January 2020 at the departure terminal of the main international airport of the country. The patient was treated at the National Institute of Infectious Diseases (Infectious Diseases Hospital – IDH) in Colombo and discharged mid-February after full recovery. Sri Lanka's preparedness for COVID-19 prevention and cure was well displayed through the prompt detection and successful management of this first patient. The first Sri Lankan patient was reported in early March, more than a month apart from the first patient diagnosis, followed by a slow daily rise in the numbers, establishing the first COVID-19 wave in the country. Based on the global disease trends and patterns, the health authorities paid much attention to strengthen the hospital emergency preparedness and response plans of all health-care institutions. The needs were addressed by the Government using a three-tier approach as shown in Fig. 10.1 ( Ministry of Health and Indigenous Medical Services, 2020b ).

The three-tier approach used by the Ministry of Health of Sri Lanka to immediately address the need of strengthening the hospital emergency preparedness and response plan of all state health-care institutions of the country.

Initially only three hospitals—the IDH, Colombo East Base Hospital, and the Welikanda Base hospital in the North Central Province of Sri Lanka—were designated as COVID-19 treatment facilities. IDH was immediately designated to treat COVID-19 positive individuals and its infrastructure was rapidly developed. By mid-March the Welikanda Base hospital was converted to a fully equipped COVID-19 treatment center. Personnel from the Tri-forces were deployed in rapid construction activities where facilities were uplifted. By April 2020 just as the total number of COVID-19 patients was reaching 700, the authorities designated the Defence University (Kotelawala Defence University) hospital as a treatment center and 30 other hospitals as isolation centers to house suspected patients. They included tertiary as well as secondary care institutions covering most districts in the island. This was an important measure to ensure local preparedness to respond to a large number of suspected and confirmed cases as was reported in China and Europe during that period.

Hospitals with isolation centers, however, continue to provide the usual diverse health-care services, other than routine clinics, to the general public. Patients at risk, i.e., those with noncommunicable diseases, elderly patients, and pregnant women, are discouraged to attend the clinics. As many of these patients depend on freely issued medication, they are given options to get their prescribed medicine delivered to their residence or to be issued to a relative visiting the clinic. This arrangement was possible as the hospitals have well-maintained clinic registers with patient information. COVID-19 surveillance was expanded using existing respiratory disease surveillance systems and hospital-based surveillance. Heads of all the state health-care institutions were strongly advised by the health authorities not to deprive any patient of their usual standard of care due to their COVID-19 status. Such directions are vital to ensure the general well-being of the majority while caring for the directly affected, as the general public highly depends on state hospitals for any medical emergency and inpatient care.

The central health-care authority further advised and guided all the tertiary and secondary care hospitals including those with isolation centers to make arrangements to immediately scale up their COVID-19 preparedness as and when necessitated, based on the crisis status. The preparedness plan of the said hospitals included the establishment of a COVID-19 operational cell, outpatient and emergency department care, establishment of a designated COVID-19 suspected section/ward, provision of critical care for non-COVID and COVID suspected patients, safe transferring of patients to a COVID-19 designated/isolation hospital, ensuring safety of health-care staff, and managing COVID-19 cured patients ( Ministry of Health and Indigenous Medical Services, 2020b ). The COVID-19 operational cell is established with the expectation to ensure effective and collective decision-making at the hospital level at a critical time, and it consisted of the Head of the Institution, relevant consultants, and persons in-charge of other staff. The authorities had identified that ensuring the safety of staff is crucial in effectively managing the pandemic. Thus, supply of personal protective equipment (PPE), provision of required infrastructure and transport, continuous education and awareness programs, provision of psychological support, and ensuring surge capacity by deploying an adequate number of staff from other units of the hospital if needed were considered as essential steps to be taken at all hospitals to ascertain safety and well-being of the staff.

The Ministry of Health in no time published the guidelines for clinical management of COVID-19 ( Ministry of Health and Indigenous Medical Services, 2020b ). These guidelines, compiled by a group of expert medical practitioners in the country, highlight the importance of early case detection, prompt isolation of ill people, appropriate and timely management of patients, comprehensive contact tracing, and immediate quarantine of all possible contacts to minimize widespread community transmission to mitigate a major outbreak and associated mortality. The guidelines have even provided insight to develop the capacity of the health sector to be prepared to successfully handle any outbreak. Uniform and systematic management of all COVID-19 patients is ensured by the guideline, which is strictly followed at all state hospitals, where COVID-19 patients are managed. The private sector was not permitted to manage COVID-19 patients initially.

Disease diagnosis was limited to PCR tests during the first wave. Majority of the tests were done by the Medical Research Institute (MRI). With the rise in patient numbers during the first wave, the PCR testing facilities were established in state hospital laboratories and other government institutions, viz. universities in parallel to upgrading hospital facilities, as the authorities foresaw the need of bulk testing. In order to prevent over burdening of the laboratories, the treatment and isolation hospitals were assigned with specific laboratories for diagnostic testing.

2.4. COVID-19 community health services

The MOHs providing community health services are effectively utilized in engaging the public in quarantine and self-isolation activities where necessary. The close contacts of COVID-19 positive persons are quarantined at home or specially designated quarantine centers for 14 days irrespective of their initial PCR results. When people are home quarantined, the PHIs of the relevant MOH area is made responsible to ensure, the people under quarantine are made aware of the need to quarantine, and their basic needs such as food and other medical needs are fulfilled. The PHIs are the ideal resource persons that could be deployed to ensure the quarantine process is proper and adequate because they are the field health officers who are familiar with the neighborhood and the general requirements of the people in the area. The first wave of the pandemic halted the services of field clinics for pregnant women and the child immunization program, which are otherwise successfully handled by the PHMs in the country. However, their well-established communication network with the public has enabled them to continuously support and guide women in pregnancy-related matters and childcare. The Family Health Bureau functioning under the Ministry of Health released specific guidelines to ensure uninterrupted field maternal and child health-care services for lockdown areas and quarantined families. Safety of both the health-care workers as well as the community is given attention while guidance on field care and hospital care is provided in the instructions to field workers ( Adikari et al., 2020 ). The need of continuous therapeutic communication was also highlighted to assure that necessary mental and emotional support is extended to the community as domestic violence is inevitable at a time when people are struggling to make a living while surviving a pandemic.

3. The public responsiveness

COVID-19 pandemic has created anxiety and uncertainty, worsening the economic crisis globally, in a similar or worse manner than other pandemics have. However, it is the worst and possibly the first pandemic that the current population is experiencing during their lifetime. In that light, the current Sri Lankan population has not even experienced an epidemic that is slightly in par with the COVID-19 pandemic. The worst epidemic faced by Sri Lankans in the recent past was the Dengue epidemic in 2017. A few H1N1 outbreaks in the recent past raised the alertness of the health sector, but the risk was not sensed significantly by the general public. Thus, similarly to the majority of the world's population, the COVID-19 pandemic is a novel experience to Sri Lankans.

Although the authorities imposed restrictions on overseas visitors in a gradual manner at the emergence of the first wave, i.e., over more than 6 weeks from the first patient being reported, a public holiday was declared abruptly overnight with a slight rise of the number of patients. The holiday was extended for several days and curfew was imposed on the entire country which lasted for 52 days. This unexpected sudden lockdown immensely affected the lives of general public. The fundamental challenge for the urban population was to secure their food and medical needs. The government authorities worked out to allow essential services to function under special permission and extremely high restrictions. Mobile vending was encouraged and well guided. The postal service workers were deployed to deliver medicine to patients being followed up at state hospital clinics. The public was very much enthusiastic to grow their own vegetables and cooking their own meals during the curfew period. Gardening and cooking became good hobbies for many people who used to work strenuously at offices. Many people made use of such opportunities to rebond with families which they had missed due to their hectic lifestyles. On the contrary, another portion of the society who depends largely on daily wages lost their livelihood due to the lockdown. Challenges faced by them are discussed in a later section in this chapter.

The Sri Lanka COVID-19 Healthcare and Social Security Fund was introduced by the President. The general public, government servants, and private entrepreneurs contributed generously in different scales to the fund. In addition, they assured direct donations of medical equipment, food, and other necessities to other needy entities. Many garment factories ran out of their regular orders. However, they started producing face masks and other PPE in large scales to meet the increasing demand in the country.

4. Traditional social practices

Sri Lanka is a multiethnic country with different cultures, practices, and beliefs. The current generation is often criticized by the older generation for ignoring the rich traditional cultures and practices and embracing more of western practices. The COVID-19 pandemic has now granted an opportunity for Sri Lankans to apply such cultural practices in the day-to-day lives. The traditional way of greeting in Sri Lanka is to join the palms together and to wish “ Ayubowan ” (“may you live longer!”). At a time when hand shaking is discouraged globally to avoid physical contact with outsiders, Sri Lankans found it intriguing to readopt their own way of greeting which does not involve physical contact. More fascinatingly the greeting gives out an energetic vibe when people wish good health and long life at a time they need it the most.

Quarantining became a new term for the general public. But the concept is not. Sri Lankans get self-isolated for 14–21 days when they contract contagious diseases such as chicken pox, measles, and mumps. Although curative allopathic medicine for such diseases is available currently, patient isolation and warning of visitors by hanging Neem leaves at the entrance to the house are still practiced by many. The health promotion workers used this traditional practice to make the public aware and understand the requirement of home quarantining.

One other strong advice given to the general public is that, before entering the house after being outside they should remove all clothing and footwear and shower outside if possible. The older generations in Sri Lanka have long been practicing such manners, or at least are familiar with such practices. Hence people are not reluctant to adhere to similar advice by the health authorities. Sri Lankans frequently consume ginger, coriander, and many other spices. There is belief that such spices can boost immunity, and thus play a protective role against the Coronavirus. Therefore, with the onset of the pandemic, the use of such home remedies has increased. Steam inhaling, another practice of traditional household to ease the sinuses, and upper respiratory tract infections, has lately become a common practice among many.

Having a Buddhist majority, Buddhist temples started enchanting the Ratana sutta (Jewel discourse) with belief that it protects a person or society from evil influences and pestilences. Similarly, there have been many religious rituals carried out by others including the Christian churches and Hindu temples. Such religious practices close to the people's heart may help to uplift the spiritual well-being of the public.

5. The geographic location of the country

There is evidence that countries closer to the equator have lower COVID-19 fatality rates than those that are away from the equator ( Whittemore, 2020 ). Having exposed to optimum levels of sunlight prevents vitamin D deficiency, a reason associated with COVID-19 deaths ( Whittemore, 2020 ). Moreover, sunlight can be used as a disinfectant of the SARS-CoV-2 virus as it is known to be inactivated in 30 min at 56°C ( Eslami & Jalili, 2020 ; Whittemore, 2020 ). Being closer to the equator, Sri Lanka has a hot climate year around and can be considered a blessing in mitigating the effects of the virus.

Sri Lanka encompasses a limited number of ports to enter the country. The main international airport is the Bandaranayake International Airport among four other airports with less international functioning. There are seven seaports in the country, the Colombo port being the largest and busiest. As one of the very first precautionary actions against COVID-19 spread, the airports started monitoring the temperature of the passengers. It is undoubtedly an important step as the first COVID-19 patient was identified at the departure terminal when under surveillance ( Sri Lanka Tourism Development Authority, 2020 ). From the first week of March 2020, passengers arriving from high-risk countries were sent for 14 days essential quarantine at centers specifically set up by the Sri Lanka Army to control the entry of COVID-19 patients to the country. The government decided to totally suspend all passenger flight and ship arrivals into Sri Lanka from third week of March 2020, with the gradual increase of patients reported in the country ( Sri Lanka Tourism Development Authority, 2020 ). Being an island placed Sri Lanka in an advantageous position in controlling and surveillance of patients entering the country.

6. The role of military and police on COVID-19 management in Sri Lanka

As a country, Sri Lanka took strong measures to manage and mitigate the crisis at the initial stages of the pandemic and continue with the same. The government deployed the Tri-forces—Army, Navy, and the Air force—as well as the Police in different activities related to the management of the pandemic. Among the key activities are facilitating quarantine/isolation services, services at the COVID-19 intermediate care centers for nonsymptomatic patients, and community behavior control. Society believes that the proactive contribution of health professionals and the military personnel in battling against COVID-19 is the major reason for keeping the pandemic under control. When compared to some countries with a similar socioeconomic setting, Sri Lanka so far has successfully managed the pandemic while minimizing deaths. According to the report on combating COVID-19 Sri Lankan approach by the State Intelligence Service, the first line of the operations of preventing the spread of COVID-19 is through the military, police, and Intelligence sector of the country ( State Intelligence Service, 2020 ). The major task of this line of operations was to sustain the magnitude of the pandemic into a manageable scale for the medical and health-care sectors. There are three major components of this process, i.e., detection, isolation, and tracing ( Fig. 10.2 ). The Ministry of Defense has taken the lead in coordinating between all these agencies in this first line of operations in Sri Lanka. In addition, the forces are at the forefront of border management to control the entry of infected persons from overseas.

Major components of the operations undertaken by the military, police, and intelligence sector of Sri Lanka to prevent the spread of COVID-19.

Roping the military in community behavior control could restrict the public freedom; nevertheless, the military has been one of the key supporters of crisis assistance and thus of humanitarian aid ( Jayasena & Chinthaka, 2020 ). In this regard, as the first line of operations, members of the military built a national resilience against the pandemic situation.

7. The role of media on COVID-19 management in Sri Lanka

Dissemination of accurate, reliable, and useful information to the public is crucial for any disaster management effort. Mass media acts as a powerful force in shaping people's attitudes and ideas. Publishing the right information regarding the pandemic situation in the country to the local and international community is critical to keep them well-informed. In this regard, there are different types of sources of information in operation. Presidential Media Division acts as the official source of information for all the initiatives, actions, and progress regarding the process of combating the COVID-19 pandemic by providing the right information to the public through its website and social media. During this crisis period, traditional media including television (TV) channels, radio channels, and newspapers, in addition to social media forums, contribute significantly to the dissemination of correct information to the community ( Hettiarachchi et al., 2020 ). Positive health practices are well promoted by the mass media via different advertisements to increase public awareness and control the spread of the disease in the country. For instance, for groups with inadequate literacy rates such as younger children (e.g., preschool level) and adults who are less conversant with reading, pictorial or video messages are the best source of information, especially on disease preventive measures such as wearing masks and washing hands. Experts from different fields have extensively used state and private media (both TV and radio channels), social media platforms to share the correct information with the general public through discussions and programs. Many TV commercials appeared with creative messages that encompass essential information to reduce exposure, social distancing, hand washing, face protection etiquette, etc.

However, since the recent past, there is an increasing concern about the misinformation spread especially by social media. There have been reports on unethical behavior of local media who had reported recognizable personal information, publishing the ethnicity of the COVID-19 patients which leads to stigmatization in the society ( Ayub, 2020 ). On the other hand, the spread of fake news via social media platforms has significantly risen which mislead the community perception regarding COVID-19 spread, its causes, and prevention ( Limaye et al., 2020 ). Many social media groups target providing “hot news” without verifying the sources and reliability.

7.1. Official COVID-19 information websites in Sri Lanka at a glance

As the COVID-19 outbreak is considered a health emergency in Sri Lanka, the government websites, especially the website of the Ministry of Health, are the official sources of information. The Ministry of Health website provides essential information on summary statistics including active cases and number recovered as well as deaths by each district. In addition, details on hospital admissions and tests carried out (PCR) are included. A Presidential Taskforce hotline is available on the Ministry of Health website for any emergency information ( Ministry of Health, Sri Lanka, home page ). Other important information including notices, guidelines, letters, and circulars are displayed on the website and these are updated frequently to provide the latest information ( Figure 10.3 , Figure 10.4 ).

Guidelines on general preventive measures for work settings.

Preventive measures for special settings. The specific settings identified are displayed.

8. Risk communication plan

In any disaster, risk communication plays a crucial role in the management and reducing impacts. The risk communication framework and risk communication plan for COVID-19 in Sri Lanka were developed by the Health Promotion Bureau of the Ministry of Health in January 2020. Accordingly, the risk communication plan consists of four phases ( Health Promotion Bureau, 2020 ) ( Table 10.1 ).

Table 10.1

Four phases of the COVID-19 risk communication plan in Sri Lanka.

However, the control strategies implemented in the country have been reported to be effective with at least 50% contact rate reduction or with at least 40% isolation of the contact history of infected population ( Erandi et al., 2020 ).

9. Challenges faced

COVID-19 pandemic is not only affecting physical and mental health but also disrupting lives and livelihoods. Many pressing concerns and challenges are being increasingly appearing in the “new normal” status of the pandemic. New problems have emerged in economic development at both local and national levels and beyond as “business as usual” scenarios have changed. In times of uncertainty and with a plethora of regulations to manage the pandemic many vulnerable groups including poor and marginalized communities, part-time and temporary workers, low-income households, fishery and agricultural workers, and self-employed individuals are severely affected ( Deyshappriya, 2020 ). Hospitality, apparel, and other export-oriented industries on which a considerable portion of the country's economy rely on are facing the greatest challenges. The exceptional and sudden increased costs of health care and safety management have taken the country's focus away from some essential developmental activities.

The interruption caused to the social structure is formidable. As Sri Lanka is a country with a social fabric of interconnected societal segments of family members, relatives, and friends, social isolation, quarantine, and lockdowns have affected psychosocial health. Among the most vulnerable groups are the poor, women, children, sick, and elderly. Restrictions on social gatherings that include religious rituals, cultural events, functions, sports, and leisure activities have hit the society badly. The virtual work environment has resulted in individuals being restricted to their homes and weakened social cohesion and discontent.

10. Conclusion

COVID-19 is still spreading globally at an alarming rate. While some countries that were fortunate to fully or nearly fully vaccinate their populations fight to restore health and normal life, some countries are still far from coming out of the COVID-19 disaster. Even though with unprecedented challenges, Sri Lanka's struggle to control the emergency situation which is basically managed by the health authorities and supported by other agencies has been successful to date. Specifically, the three-tier approach adopted has generated fruitful results. Public responsiveness to successful containment of the disease is increasingly evident. The media and the armed forces extend help in managing the pandemic situation. Yet, the pandemic has necessitated the need for a broader and integrated attempt to understand and act on many pressing socioeconomic concerns and as issues that are growing day by day.

Acknowledgment

We profoundly thank Dr. Sachini Amarasekara of the Department of Zoology and Environment Science, University of Colombo, Sri Lanka, for the English Language check.

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