THE tragedy of Sri Lanka is not only the horrors that have unfolded but that they were wholly avoidable. Years of mismanagement and corruption at the highest level enabled by its leadership, and now a cost of living crisis which is destroying the lives of millions. Almost sounds familiar.

The situation Sri Lanka has found itself in is particularly bleak. Its central bank warned that inflation reached 54.6% in June and could potentially rise to 70%. The island has nearly exhausted its supply of food and fuel as it no longer has the foreign currency to pay for crucial imports. In May, the country failed to make an interest payment on its foreign debt for the first time in its history. The country is bankrupt, owing more than $51billion to foreign lenders, including $6.5bn to China.

How did a country once touted as a model of economic development end up in this crisis?

At the heart of it lies poor economic mismanagement. For two decades, the country’s politics were dominated by the Rajapaksa family. Since the end of its civil war in 2009, the state focused on providing goods to its domestic market at the cost of boosting exports which over time has led to it importing $3bn more than it exports each year.

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The Rajapaksas oversaw the country taking on unsustainable debts to fund grandiose projects such as Hambantota port. This particular incident saw China lend Sri Lanka money to build the unprofitable port and, when it predictably failed to turn a profit, China was able to take it on for a 99-year lease in 2018.

President Rajapaksa also oversaw widespread tax cuts in 2019 which lost the government income of more than £1.13bn a year. And then Covid came along and wiped out its tourist trade – one of its biggest foreign currency earners.

As if this were not enough, the government then tried to limit the outflow of foreign currency by banning the import of chemical fertiliser in early 2021. The ban caused rice production to collapse by 20% in six months, forcing the country to spend $450 million on rice imports when previously it was entirely self-sufficient. The production of tea, the country’s biggest export, fell by 18% as well.

The rise in energy prices caused by the war in Ukraine was the final straw and here we now are. Only after around 300,000 protesters took over President Rajapaksa’s home and offices and set fire to Prime Minister Ranil Wickremesinghe’s house did the President resign (and only after he fled the country).

The situation in Sri Lanka is tragic but sadly not unusual. The country is the canary in the coal of unsustainable debt. Plenty of other countries find themselves in similar situations.

The World Bank noted back in March that even before the pandemic (which hugely expanded government debts around the world) close to 60% of the poorest countries were already in debt distress or at high risk of it. The same post noted that “over the next 12 months, as many as a dozen developing economies could prove unable to service their debt”.

Yet whereas 30 years ago most of those countries owed debts to other governments, by the end of 2020, low and middle-income economies owed five times as much to commercial creditors as they did to bilateral creditors, with much of that debt vulnerable to variable interest rates.

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WE need to be ready to assist in the next crisis – and Scotland can play that part. One of the few things that has never been lost to the Union has been Scots law, which dates back hundreds of years. Around the world, Scotland’s legal sector – particularly in the field of debt arbitration – has the potential to be a major service export. In providing our legal expertise, we can utilise our resources to help others overcome their own crises. Combined with our progressive, feminist foreign policy, we can utilise our skilful legal sector in the field of debt arbitration to help prevent crises such as those we have seen in Sri Lanka.

Of course, Scotland will not achieve this overnight (and certainly not as part of the Union). However, the oncoming storm of global debt crises means that we must be ready.

That, alongside the climate crisis and the food crisis caused by the war in Ukraine, means we need to help create a world of global cooperation to overcome mutual problems.

Debt arbitration may not seem the most exciting thing in the world, but for those who would struggle to feed their kids and house themselves, it might just be one of the most effective ways Scotland can be a good global citizen.