How Putin’s war is fueling crises in developing countries

Falling prices and fuel shortages have fueled violent protests in the Sri Lankan capital, Colombo. The consequences of the war in Ukraine are exacerbating the economic crisis and political chaos. Are there unrest in other developing countries as well?

The Sri Lankan president rejects calls for resignation and responds with an order to shoot the robbers. Under pressure from the street, his government resigned and he replaced the head of government. But the Asian country continues to plunge into political chaos. Despite the curfew, those starving in the capital set fire to ministerial villas, cars and attack overwhelmed police officers, at least on Twitter.

Sri Lanka is approaching a food crisis, with complex and partly domestic causes. However, Putin’s war of aggression in Ukraine has pushed up energy and agricultural prices around the world. In the midst of the economic crisis, this is causing an explosive mix: the state is so over-indebted that it could still pay a double-digit million-dollar bill for energy imports with the remaining foreign exchange reserves. In desperation, President Gutabay Rajapaksa negotiated an oil loan with India. But then?

The growing fuel shortage for months is not just affecting vendors and service providers. Farmers also lack diesel tractors. In any case, its revenue fell after the government banned the use of artificial fertilizers a year ago. The consequences are only now becoming clear: in 2021, the rice harvest has fallen by half a million tonnes to 2.9 million. Lower yields also mean less money for the start of the planting season.

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On a tropical island, many farmers cultivate their land with rice and bananas, usually in abundance. Without subsidized fertilizers, many farmers have stopped growing; only a few were ready for change. The ban was officially justified by environmentally friendly changes in agriculture. However, critics suspect that the government is referring to large-scale land grabs due to leases or purchase agreements that generate currency, and that the failures of many smallholder farmers are being taken into account. Others attribute this ban to high subsidy costs, which also devour foreign exchange reserves. Due to the war in Ukraine, imports of artificial fertilizers became even more expensive.

“Ukrainian effect”

What to do in Sri Lanka aggravation The international crisis group, a political risk monitoring organization, calls the “Ukraine effect”. The country’s economic crisis would hit even without an invasion of Ukraine, Ukrainian expert Alan Keenan told the Washington Post. But the war makes things worse: “Due to the Ukrainian effect, a loan that would have lasted for two months for fuel imports is now only enough for one month,” he says. “Even if the debt is canceled: less food, less fuel, less medicine will be imported.

The situation is critical. Farmers who have harvested a quarter less on average can no longer buy fuel. At the same time, the cost of supply routes from rural to urban areas is rising: food prices have risen by around 50%. Wholesale markets report that chili peppers are 40 percent more expensive than last year, okra 50 percent, potatoes 60 percent and green lemons 240 percent. Electricity has been gone for several months now, and food will soon have to be imported. In some cases, cooking gas also becomes unaffordable.

Rationalization in the context of the economic crisis: In the Colombo police station, people are waiting for gas to be delivered.

Rationalization in the context of the economic crisis: In the Colombo police station, people are waiting for gas to be delivered.

© IMAGO / NurPhoto

Rajapaksa hoped that the Russians and Ukrainians, in particular, would encourage sluggish tourism. 2021 they accounted for a quarter of visitors. Negotiations with the International Monetary Fund (IMF) are aimed at avoiding the bankruptcy of the state – so that at least oil imports, which not only support mobility and industry, but also 40 percent of electricity production, will enter the country again. The main response of the government to the political turmoil caused by the economic chaos is the imposition of a state of emergency.

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