Debt and Democracy: Economic Strains and Political Stability in Sri Lanka
Within the intricate landscape of international relations, economics often serves as the unseen hand shaping diplomatic maneuvers and global interactions. The recent release of the World Bank’s International Dept Report for 2023 sheds light on the economic dynamics influencing foreign affairs. One striking metric from the report is the unprecedented and record $443.5 billion spent by developing countries in servicing their external debt in 2022, diverting resources from vital sectors such as health, education, and environmental initiatives.
The surge in debt servicing costs underscores a stern reality for many developing nations: the burden of debt hampers their ability to address pressing domestic needs. As resources are siphoned away to meet debt obligations, governments are often forced to sacrifice social welfare programs crucial for sustainable development.
One country in particular, Sri Lanka, is grappling with a growing debt burden. Economic mismanagement, high levels of borrowing for infrastructure projects, and the unforeseen repercussions of the COVID-19 pandemic can be attributed to its debt-to-GDP ratio surpassing 90%, raising concerns about sustainability. In addition, their Gini Index coefficient was reported at 82.3, indicating extremely high levels of economic inequality between the affluent and the marginalized. Such disparities breed social unrest and political instability, posing challenges for democratic governance.
Due to Sri Lanka's regressing socioeconomic status, they have found themselves ineligible for financial aid for development, exacerbating conditions of poverty and political instability. Sri Lanka graduated to credit eligibility from the International Bank for Reconstruction and Development in 2017, indicating their increase in economic stability and ability to move forward on development projects. However, they regressed back to the International Development Association in December of 2022 which focuses on supporting the poorest countries with interest free loans. These reversals demonstrate a decline in economic prosperity and these setbacks hamper progress towards poverty reduction and exacerbate political instability.
The implications of mounting debt on democracy are multifaceted; democracies rely on robust social contracts, wherein governments are accountable to their citizens for providing essential goods and services. However, when economic resources are disproportionately allocated to debt repayment, governments face pressure to prioritize creditors over constituents. This erosion of social trust can undermine democratic legitimacy and fuel disillusionment with political institutions.
Despite economic burdens, Sri Lanka maintains a stable multi-party democracy – albeit there are high levels of political violence. With the next election in September and October of 2024, the country needs to navigate its economic recovery and ensure sustainable development. These economic upheavals will likely weigh heavily on democratic legitimacy. Proponents of modernization theory argue that economic decline and democratic backsliding are intertwined: we will likely see a sharp decrease in democratic strategies during the 2024 elections.
Economic and political instability in Sri Lanka could potentially affect regional security which may have future implications for American foreign policy. The United States would likely step in to ensure stability in the region, particularly considering the economic importance of maritime trade routes like the Hambantota port, situated in the southern part of Sri Lanka.
Ideally, economically unstable nations such as Sri Lanka will begin to stabilize, leading to enhanced democratic principles and bolstering the sustainability of the global economy. The upcoming elections in Sri Lanka, as well as neighboring countries like India and Bangladesh, will have repercussions on trade relations and should be considered when looking at the geopolitical trends influencing the international economy in 2024.
