Embattled president to resign on July 13, the announcement came after a tumultuous day in which protesters stormed his residence and set the prime minister’s home on fire.

Parliament Speaker Mahinda Yapa Abeywardena said in a televised statement on Saturday that Rajapaksa has agreed to resign on July 13.

HOW THE CRISIS UNFOLDED IN SRI LANKA

The current economic crisis in Sri Lanka is a result of badly-timed tax sops, poor investments in projects, and Covid-induced restrictions.

1. In 2019, the Sri Lankan government announced several tax cuts, leading to a huge dip in revenue. This came at a time when the historically weak government finances were still looking for ways to pay off the sovereign bonds that Sri Lanka’s governments had been issuing for the past 13-14 years, without provisioning for repayment.

2. The international debts for Sri Lanka have mounted to unmanageable amounts. The nation now owes about USD 7 billion. Among its debts is a USD 1-billion international sovereign bond that matures in July. Sri Lanka’s public debt has risen (in projection) from 94 per cent of its gross domestic product (GDP) in 2019 to 119 per cent of the GDP in 2021, the International Monetary Fund (IMF) said in early March.

3. Sri Lanka’s foreign exchange reserve has fallen 70% since January 2020. This stalled its imports, leading to an acute shortage of several essential items. Its currency has undergone substantial devaluation.

4. The loan arrangements with China too contributed to the Sri Lankan economic crisis. Most of the loan it received from China in the past decade was invested in low-return projects, such as the construction of ports, airports, and coal power plants. The loan amounted to nearly USD 5 billion.

5. The final blow that led to the crisis in Sri Lanka was dealt by the Covid-19 pandemic. One of its major contributors, tourism, was severely hit during the pandemic. Taking the industry to abysmal lows. When the pandemic looked to subside and travel curbs were scrapped, tourist in-flows increased, with nearly 25% of visitors arriving from Ukraine and Russia till February. However, the impact of the Russia-Ukraine war trickled down and the tourist in-flow from these countries stopped. Its traditional tourist sources, India, China, the UK and Germany, have not recovered to pre-Covid levels

In May it failed to make a payment on its foreign debt for the first time in its history.

The government blames the Covid pandemic, which affected Sri Lanka’s tourist trade – one of its biggest foreign currency earners. It also says tourists have been frightened off by a series of deadly bomb attacks on churches in 2019.

However, many experts say economic mismanagement is to blame.

How else have people been affected? 

Shortages of food and fuel have caused prices to soar. Inflation is now running at 30%.

There have been power cuts, and the lack of medicines has brought the health system to the verge of collapse.

Protests have spread across the island in recent months.

Does the government have a plan to solve the crisis? 

Prime Minister Ranil Wickremesinghe has said the government is now so short of funds that it will be printing money to pay employees’ salaries. 

He warns this will lead to further price hikes, with inflation rising to 40%.

He also says state-owned Sri Lankan Airlines could be privatised.

Sri Lanka is also asking Russia and Qatar to supply it with oil at low prices.

How much foreign debt must Sri Lanka repay? 

Sri Lanka’s government has racked up $51bn (£39bn) in foreign debt. 

This year, it will be required to pay $7bn (£5.4bn) to service these debts, with similar amounts for years to come. The government is seeking emergency bridging loans of $3b from the International Monetary Fund (IMF) so it can pay.

The IMF has said the government must raise interest rates and taxes as a condition of any loan. 

The World Bank has agreed to lend Sri Lanka $600m. 

India has committed $1.9bn and may lend an additional $1.5bn for imports. 

The G7 group of leading industrial countries – Canada, France, Germany, Italy, Japan, UK and the US – have said they will provide help to Sri Lanka in securing debt relief. 

Sri Lanka owes $6.5bn to China and the two are in talks on how to restructure the debt.

Sri Lanka has had to impose a ban on sales of petrol and diesel for private vehicles as it faces its worst economic crisis in 70 years.

At the end of its civil war in 2009, Sri Lanka chose to focus more on providing goods to the domestic market, instead of trying to break into foreign ones. So income from exports remained low, while the bill for imports kept growing. 

Sri Lanka now imports $3bn (£2.3bn) more than it exports every year, and that is why it has run out of foreign currency.

Much of the popular anger for the economic crisis has been directed at President Gotabaya Rajapaksa and his brother, Mahinda, who he appointed to be prime minister, but dismissed in May.

President Rajapaksa has been criticised for big tax cuts he introduced in 2019. Finance Minister Ali Sabry has said these lost the government income of more than $1.4bn (£1.13bn) a year.

When Sri Lanka’s foreign currency shortages became a serious problem in early 2021, the government tried to limit them by banning imports of chemical fertiliser.

It told farmers to use locally sourced organic fertilisers instead.

This led to widespread crop failure. Sri Lanka had to supplement its food stocks from abroad, which made its foreign currency shortage even worse.

An IMF report in March this year said the fertiliser ban (reversed in November 2021) also hurt tea and rubber exports, leading to “potentially substantial” losses.

Sri Lanka opposition hopes to install new gov’t amid turmoil

However, Sri Lanka’s opposition political parties will meet Sunday to agree on a new government a day after the country’s president and prime minister offered to resign in the country’s most chaotic day in months of political turmoil, with protesters storming both officials’ homes and setting fire to one of the buildings in a rage over the nation’s economic crisis.

It was not clear if President Gotabaya Rajapaksa was there at the time, and government spokesperson Mohan Samaranayake said he had no information about the president’s movements.

Thousands of protesters entered the capital Colombo on Saturday and swarmed into Rajapaksa’s fortified residence. Crowds of people splashed in the garden pool, lounged on beds and used their cellphone cameras to capture the moment. Some made tea or used the gym while others issued statements from a conference room demanding that the president and prime minister go.

Protesters broke into the official residence of Sri Lanka’s president and prime Minister on Saturday as people were demonstrating over the country’s worsening economic crisis.

It started with more than 100,000 people amassing outside the President’s House in Colombo, calling for President Gotabaya Rajapaksa to resign. Demonstrators were later seen inside the building, hanging banners from the balcony and swimming in the residence’s pool. Rajapaksa was not at the site and had been moved elsewhere, security officials told

pictures: Protesters storm Sri Lankan President’s House