Attachments
A. SITUATION ANALYSIS
Description of the crisis
Sri Lanka is facing a complex emergency characterized by high inflation, a deteriorating currency, food insecurity, shortages of fuel, essential healthcare services, threatened livelihoods, reduced public services, and rising protection concerns. The crisis has been exacerbated by a reduction in domestic agricultural production due to a failed organic farming transition.
The country experienced a 'peace dividend' between 2010 and 2016, with economic growth averaging 6.2 per cent between 2010 and 2016. However, growth slowed in 2017 and the economy contracted by 3.6 per cent in 2020 due to the COVID-19 pandemic. 1The decline of the global economy, rising commodity prices, a weak tourism sector, and a fiscal deficit contributed to a fall in the value of the Sri Lankan Rupee.
The Central Bank was unable to defend the currency due to insufficient international reserves, leading to the government defaulting on debt payments in May 2022. Inflation rates rose sharply since the government could not import essential commodities, including fuel, which further increased shortages and inflation. Inflation rates slowly dropped, with food inflation (Year-over-year) decreasing from 30.6 per cent in April 2023 to 21.5 per cent in May 2023, while non-food inflation (Year-over-year) decreasing from 37.6 per cent in April 2023 to 27.0 per cent in May 2023.
The emerging crisis led to country-wide civil unrest. Following mass protests, which started in March 2022, a new government was installed in May, and the country’s president was replaced in July. To help ensure support from the International Monetary Fund (IMF), the new government raised taxes to offset the external debt, adding to the economic burden, including that faced by the most vulnerable. On 20 March 2023, the IMF Board approved a 48-month extended arrangement under the Extended Fund Facility of SDR 2.286 billion (about USD 3 billion) to support Sri Lanka’s economic policies and reforms.
The fiscal macroeconomic crisis resulted in a humanitarian emergency during the fourth quarter of the year 2022, causing millions of people to face widespread and chronic food, fuel, cooking gas and health services shortages. Unprecedented food inflation increased food insecurity, particularly among children under five, pregnant women, and lactating mothers. The poverty rate accelerated since the crisis began, with food inflation reaching a record high of 94.9 per cent in September 2022. Sri Lanka is ranked as having the world's sixth-highest food inflation.
Humanitarian impact
According to UN OCHA, the humanitarian needs can be summarized as follows:
5.71 million Estimated no. of people affected by the crisis
Agriculture and livelihoods Price increase in agricultural inputs hit small-scale farmers lack fertilizers 3.45 million people in need
Food security Lack of access across the country and certain food supplements 4.88 million people in need
Nutrition Loss of income and shortages of essential food and household items 2.43 million people in need
Water Lack of access across the country and certain food supplements.
2.58 million people in need
Education Increase of high-risk child protection incidents 1.2 million people in need
Protection Power cuts, access to public transport, and lack of stationery items 0.96 million people in need
Health Severe shortages of life-saving medicines and medical consumables 1.97 million people in need
The Sri Lankan crisis has led to increased vulnerability, poverty, and destitution among a significant portion of the population. In 2021, 2.4 million people fell below the international poverty line for lower-middle-income countries, with more poor households losing over half of their income. This has resulted in people selling assets, becoming indebted, and cutting down on food, and their children are less likely to attend school. An estimated 5.7 million people are in need of humanitarian assistance, with at least 4.9 million being food insecure. The crisis has disproportionately affected vulnerable populations, including children, pregnant women, people with disabilities, female-headed households, migrants, refugees, and marginalized ethnic and religious groups.
Support for these groups has decreased, making them even more vulnerable. Food insecurity has also made them vulnerable, including informal wage earners, minimum wage earners, single female-headed households, families with multiple children, low-income households, chronic illnesses, and disadvantaged farmers. Outbound migration is increasing, affecting skilled labor retention, and putting children of absent parents at risk of neglect.