If you’ve been watching the news, you may have heard that Sri Lanka is about to run completely out of fuel. They’re also facing massive food shortages... and political instability.
It’s a dire situation which brings to mind Venezuela.
Years of political and economic instability have led to the largest migration from Venezuela in years as citizens seek food and work (more than six million people have left the country).
Here are some of the more recent stats about the situation in Venezuela:
- One of every three people in Venezuela is food insecure.
- The health system has collapsed, and, as a result, diseases that had once been eradicated (measles, malaria, etc.) are back and spreading.
- The monthly inflation rate has remained above 2,000%.
Sri Lanka looks to be heading in the same direction. Could America be, too?
Why Sri Lanka Is in Such a Dire Situation
Sri Lanka is facing its worst financial crisis since it declared its independence from Britain in 1948.
Inflation is out of control. They have no food. Gas lines are reaching several kilometers because of the lack of gas, and fuel is about to run out. Medicine and cooking oil are scarce.
The country has no foreign currency reserves so they cannot purchase imports needed – and they rely on imports.
The situation is so dire that the federal government has already had to give an unplanned day off on June 13 because of transportation issues and power disruptions.
Additionally, Sri Lanka’s federal government just implemented a four-day work-week to give employees time to grow their own food and to help cut energy costs in government buildings.
Now, add a political crisis with historic protests. It’s an absolute mess.
How did this happen?
It wasn’t one thing, but a combination of factors tat has led to this moment.
Too many imports
First, Sri Lanka relies heavily on imports. It imports most things consumers use…and now it can’t pay for the essential items like food and gas.
Gabrielle Reyes explains, “Without sufficient foreign currency reserves to pay for such imports, Sri Lanka began suffering from acute food, fuel, and medicine shortages in early March. These shortages have worsened in the months since then, causing related power outages and political unrest.”
Major industries dying
Secondly, Sri Lanka used to get most of its income from tourism. When the pandemic hit, it destroyed this sector, which never fully recovered.
Another reason for the current political and economic instability is that previous politicians implemented poor policies that ended up hurting citizens more than helping them.
For example, in 2021, the Sri Lankan government banned chemical fertilizers to push the country toward a fully organic agricultural industry. This forced the country to rely on imports for food.
Former President Gotabaya Rajapaksa recently apologized for the measure, calling it a “mistake.” But it was too much, too soon.
Global economic dominoes falling
Enter the war in Ukraine to make matters worse. With crude prices more than doubling, Sri Lanka, which imports its oil, took a big hit. The country had no money in reserves to pay for the soaring oil prices, and started to run out of fuel to run the government and provide for its people.
And then there’s inflation. As of press time, it’s at a record high. According to Bloomberg, “Sri Lanka inflation hits a record 39% as shortages persist. Food inflation rose 57.4% in May, non-food climbed 30.6%.” Moreover, the rate of the Sri Lankan rupee has suffered more than 40% devaluation.
Could What Is Happening in Sri Lanka Happen in the U.S.?
When you watch the news and see the long lines for gas or hear that an entire country has run out of money and has few options for outside help, it can be easy to believe it couldn’t happen here.
Consider the following and draw your own conclusions:
The US relies heavily on imports
Much like Sri Lanka, the US imports a whole ton of stuff. And, much like Sri Lanka, we are reliant on others to bring in food, medical supplies, and energy.
The US imports double the amount that China imports – food, energy, medicine, batteries, etc. – despite the fact they have significantly more people.
And America imports more food than any other country.
Food Safety News reports, "Food imports will likely continue to increase, with imports of fresh fruits and vegetables rising 45 percent from 2016 to 2027. In other words, 75 percent of our fruit and almost half of our vegetables will likely be imported by then."
The US also outsources energy, which is a hotly debated topic. We depend on energy sources, such as petroleum, crude oil, natural gas, and coal. Everything we use, from transportation to food production, requires it. According to EIA (U.S. Energy Information Administration), "In 2020, about 98% of US total annual natural gas imports were from Canada and nearly all by pipelines."
We have also felt the effects of poor policies
The situation in Sri Lanka is due to years of economic mismanagement. If they had currency reserves right now, they wouldn’t be in this place because they could buy goods they need to pay for imports.
Earlier, we mentioned the mistake the Sri Lankan government made by pushing too much too fast going fully organic and outlawing chemical fertilizers to push the country toward a fully organic agricultural industry.
While well intended, it has helped contribute to a massive food shortage.
It is easy to see the same thing happening here. In fact, it already has.
The push for more climate-friendly renewable energy sources is playing a role in the global energy crisis. The problem is that the transition from fossil fuels to renewable energy sources requires time – time which we don't have, considering the state of the Union.
Economist Ed Yardeni said to Forbes, "Renewables aren't ready for prime time. So instead of a smooth transition, the rush to eliminate fossil fuels is causing their prices to soar and disrupting the overall supply of energy."
At the same time, coal has been replaced by more environmentally friendly energy sources. Between 2010 and May 2019, 290 coal power plants, or 40% of the US's coal-generating capacity was shut down.
Inflation is out of control
Sri Lanka’s sky-high inflation is due to a combination of factors including poor fiscal policy and ignoring the growing issue. Plus, the Sri Lankan government spent more than they had and took out loans they couldn't pay – similar to the U.S. right now.
Bloomberg reports, “US inflation accelerated to a fresh 40-year high in May, a sign that price pressures are becoming entrenched in the economy. […] The consumer price index increased 8.6% from a year earlier in a broad-based advance […]. The widely followed inflation gauge rose 1% from a month earlier, topping all estimates.”
Soaring energy prices, rising labor costs, and interest rates are driving inflation higher. So is the demand for goods.
When the pandemic started, the federal government decided to pump money into the economy as businesses shut down. This money printing (producing money we don’t have), coupled with the Federal Reserve’s slow response to tackle our rising inflation, has contributed to the problem.
According to the BBC, “The risks that the packages would drive inflation were raised before they were passed, most notably by Harvard economist Larry Summers, a longtime Democratic policy adviser, as well as some Republicans.”
Is it too much of a leap to see how our future could look like today’s Sri Lanka? You decide for yourself.
How to Prepare for This Type of Instability
While we don’t know what the future holds, it is wise to prepare for any and every possibility – including for a situation similar to Sri Lanka. The best way to prepare for economic, political, and food instability is to become more self-reliant... NOW.
Consider the issues Sri Lankans are facing (food insecurity, lack of fuel, and medical supplies, etc.) and think about the ways you can manage these issues independently.
- Growing your own food. Don't depend on fruits and vegetables that are imported from other countries. Instead, grow your own and learn how to preserve them. also, save seeds and learn how to grow food before you can’t find your favorite fruits and veggies in the grocery store.
- Invest in food-growing education. Don’t wait for a full-scale food crisis. Invest in your growing education now so you’re ahead of the curve. Get books. Take classes. Get out in the dirt and plant.
- Stock up on emergency food. Not only is long-term emergency food beneficial for disasters or shortages, but buying it now is a good way to avoid paying the increasing cost of inflation on items found in the grocery store.
Get to know your local suppliers. Now is the time to create relationships with local suppliers. Their goods might not be cheaper, but they may be available when other sources dry up.
- Invest in solar power tools and batteries. Power outages come with this type of instability. You'll need solar powered tools and batteries. We import most of our batteries, so it's wise to stock up on them before something happens and we can't get them in the US.
- Buy discounted medical supplies. Whenever possible, stock up on discounted medical supplies and medications.
Prepare today for instability tomorrow, friends.
Preparedness Advisor, My Patriot Supply