Sri Lanka’s economic chaos reverses steady rise of middle class

A file photo of demonstrators celebrating after their entry in PMO (Photo: Reuters)
A file photo of demonstrators celebrating after their entry in PMO (Photo: Reuters)

Summary

Many families have suffered a decline in their living standards after years of financial security

For many years, Trichlet Decruz lived a comfortable life in the capital of Sri Lanka. The 42-year-old traveled abroad for vacations, dined out with her family and spent freely at the grocery store.

But all of that ended when the economy nosedived this year, and fuel shortages and sky-high inflation crushed the ship-repair business that she runs with her husband.

“We are devastated," said Ms. Decruz, who lives with her husband and three sons. “We can’t live the way we used to. Not anymore."

Sri Lanka’s financial woes have ravaged the country’s growing middle class, a slice of society whose rising incomes and spending power had helped cement the island nation’s reputation as an economic bright spot in South Asia. Even after the pandemic devastated its tourism industry, Sri Lanka’s per capita GDP of $3,815 was still the highest for the region, after the Maldives.

Anger over the crumbling economy spurred many in the middle class to join in mass demonstrations, which political analysts say was a tipping point in the protest movement that ultimately toppled the previous president, Gotabaya Rajapaksa. They are a key constituency that Ranil Wickremesinghe, the president elected last week by Parliament, will have to placate as he works to fix an indebted economy with scarce revenues.

“The intensity of the public dissatisfaction became more amplified when the middle class came out," said Anush Wijesinha, a Colombo-based economist. “You had IT professionals, workers in the services sector and in banks, coming out not just for a one-day protest but fairly consistently."

Ms. Decruz and her husband, Goodson Coonghe, say their families did well from their dried-fish business, a Sri Lankan staple. But they struck out with a new venture, spending the past decade building up a company that provides repairs and spare parts to ships. In brisk times, they dispatched four or five trucks carrying gauges, valves and other equipment to the country’s four major ports every day.

But when depleted foreign reserves left Sri Lanka unable to pay for imports of essential items, Mr. Coonghe said they had to turn down work because there simply wasn’t enough fuel to transport goods. The costs of spare parts have also doubled or tripled. A former chief engineer on cargo ships, Mr. Coonghe, 47, said their profit has plunged to about 30,000 Sri Lankan rupees a month, or about $84, a tenth of their income during normal times.

The declining fortunes of the middle class will further deepen the country’s economic turmoil, said economist Nisha Arunatilake of the Institute of Policy Studies of Sri Lanka. “The middle class is no longer able to maintain their consumption," she said. Consumer spending makes up about a 70% share of Sri Lanka’s GDP.

The family’s travails have already had a cascading effect. They had 14 full-time workers, but had to let them go. “We are really struggling," Mr. Coonghe said. “We can’t manage. We can’t pay them."

The biggest disruptions to her daily routine, said Mrs. Decruz, involve food shopping and preparing meals.

Gone are the days of serving chicken at least four times a week. Meat is now no longer affordable more than once a week, and she has stopped regularly buying milk and eggs. Their family diet now mostly consists of rice and fish curry, she said.

Ms. Decruz said that has been hard for her sons age 6, 17 and 20. “They say, ‘Why are you serving us potatoes every day?" she said. Despite her cutbacks, her family’s monthly food bill has shot up from 50,000 rupees a month to a six-digit expense.

Stores have been running out of imported cooking gas, which many middle-class families like Ms. Decruz’s used to prepare food. Many Sri Lankans turned to old-fashioned methods of cooking with scavenged wood or kerosene.

“My mother doesn’t know how to cook food on firewood, even my grandmother doesn’t remember," she said. “How can I cook on wood? Where would the smoke go?"

She switched to an induction cooker, but the 13-hour-a-day power cuts mean she typically cooks all three meals at once.

For her older sons, life revolves around lines.

Instead of hanging out in cafes, where the price for a cup of coffee has more than doubled, Snowson Coonghe, 17, said he invites friends to keep him company in the queues that snake around gas stations.

His older brother, Thomas Coonghe, said his typical routine now consists of going to work in the day at the foreign-currency trading company he co-founded, and then standing in gas lines all night, with a few hours of sleep snatched at home or inside an auto rickshaw of someone else also in line. Before, refueling was a weekly errand.

About half of his 35 employees can’t get to work regularly, he said, because they don’t have transport. On work calls, Thomas said he tries to hide the fact that he regularly dials in from a pump. When a crowd started clapping and cheering after a gas station received fresh supplies, Thomas said he scrambled to explain the background noise to a client.

“So I told him, it’s my birthday," Thomas said.

Despite all the penny-pinching, Ms. Decruz said they have had to dip heavily into savings. They have sold off two of their vehicles to keep their business afloat. Ms. Decruz also pawned some of her jewelry. They have only enough reserves left to last for another three or four months. After that, “it will depend on God’s grace," she said.

Both Ms. Decruz and her husband said they are used to living through turmoil. A long-running civil war between the mainly Sinhalese government and separatist rebels known as the Tamil Tigers ended in 2009. A series of bombings at churches and hotels in 2019, including at a Catholic church in their neighborhood, disrupted their sense of safety and killed members of their community.

But Ms. Decruz said she has never been racked by so much anxiety and anguish. The stress has caused her to suffer migraines and insomnia on almost a daily basis.

“This is the hardest it’s ever been," she said. “And there seems to be no end to this."

She and her husband tried to regularly participate in the mass antigovernment protests against the former president. Mr. Coonghe said he sometimes came home from work at three in the morning, and then he and his wife would go over to join protesters for an hour at the main camp near the Indian Ocean.

The couple sometimes butt heads with their eldest son, Thomas, who says he doesn’t care much about politics. His primary concern, he said, is keeping his business humming and making money. He wants to give Mr. Wickremesinghe, the new president, a chance to fix things.

Ms. Decruz said she was praying for Sri Lanka to return to normalcy, but knows it will be many years before they can return to the lives they had.

“Are we cursed to live here?" Ms. Decruz said. “We didn’t select our place of birth. Then why should we undergo so much suffering?"

 

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