Originally published 2022-07-02.
In mid-2022 drivers in Sri Lanka were waiting in line for days to buy petrol because the country had run out of the foreign currency it needed to import fuel. Filling stations handed out queue tokens, sometimes to 150 drivers at a time, while lines at some stations reportedly stretched to 300 vehicles or more. In Colombo, one taxi driver told reporters he had been sleeping in his car for two days without knowing whether a delivery would ever come.
The queues were the most visible sign of Sri Lanka's worst economic crisis since independence in 1948. Official figures put annual inflation at 54.6% in June 2022, and it kept rising later that year. Here is how the island nation reached that point, what daily life looked like, and what happened afterwards.
Life in the fuel queues
Sri Lanka imports all of its oil, so when dollars ran short, fuel was among the first things to disappear. In May 2022 Bloomberg reported that the government was struggling to pay even for a single tanker cargo. Soldiers had been posted at filling stations since March to keep order, and on 28 June the government suspended fuel sales to non-essential vehicles for two weeks, keeping supplies for services such as public transport, ambulances and hospitals. Officials promised new stocks by 10 July.
For ordinary people the shortage was measured in time. Rickshaw and taxi drivers could not work. Office workers missed shifts. Families took turns holding a place in line overnight. Cooking gas was scarce too, and daily power cuts left homes and businesses in the dark for hours. Tempers frayed: in April 2022 police fired on protesters at a fuel queue in Rambukkana, and one person was reported killed.
How Sri Lanka ran out of dollars
There was no single cause. Economists and the country's own central bank pointed to several decisions and shocks that piled on top of each other:
- Tax cuts in 2019. The new government of President Gotabaya Rajapaksa cut value-added tax to 8% and reduced corporate tax, which shrank revenue and widened the budget deficit.
- Money printing. The central bank financed much of the government's spending, fuelling inflation.
- Tourism collapse. The Easter Sunday bombings of 2019 and then the COVID-19 pandemic drove visitors away. Tourism's share of GDP fell from 5.6% in 2018 to 0.8% in 2020, cutting off a major source of foreign currency.
- The fertiliser ban. In April 2021 the government abruptly banned chemical fertilisers to push organic farming. Rice production fell by about a fifth within six months, and the country had to spend around $450 million importing rice.
- Heavy foreign borrowing. External debt had grown from $11.3 billion in 2005 to $56.3 billion by 2020.
The government itself tended to blame the pandemic. Protesters blamed mismanagement and nepotism, pointing to the many members of the Rajapaksa family who held senior posts. Most analysts concluded that the pandemic exposed weaknesses that policy choices had created.
Default and the reserves crunch
Foreign reserves fell to about $1.9 billion in March 2022, far too little to cover essential imports. On 12 April 2022 the government announced it would suspend payments on roughly $51 billion of external debt, the first default in the country's history. Officials later said usable reserves had at one point fallen to only around $25 million, a figure widely reported at the time but hard to verify independently.
Without dollars, importers could not pay for fuel, medicine, milk powder or spare parts. Prices soared, the rupee lost much of its value, and shortages spread from one sector to the next.
The Aragalaya and the fall of a president
The hardship turned into a mass movement known as the Aragalaya, Sinhala for "the struggle". Protests grew from candlelight vigils in early March 2022, and on 9 April demonstrators set up a tent camp on Galle Face Green in Colombo, nicknamed GotaGoGama, which offered free food, water and basic medical help.
On 9 July 2022 huge crowds broke into the president's official residence. Gotabaya Rajapaksa fled, the Speaker of Parliament announced his coming resignation, and he formally resigned on 14 July. On 20 July Parliament elected Ranil Wickremesinghe as president.
What happened after 2022
Recovery was slow and painful, but it came. In March 2023 the International Monetary Fund approved a bailout of about $3 billion, conditional on tax increases and other reforms. Inflation, which peaked at around 64% in 2022 according to some measures, fell sharply: by August 2024 it was just 0.5%, and prices were briefly falling by the end of that year. A debt restructuring of about $12.55 billion was finalised in December 2024, and the World Bank projected a return to growth.
The fuel queues ended once imports could be paid for again, although purchases stayed rationed for some time. For many families, though, higher taxes and lost savings mean the effects are still felt.
Lessons from the crisis
Sri Lanka's story is a reminder that a country can look stable until the moment it cannot pay for imports. Warning signs included shrinking reserves, rising debt service, a heavy reliance on a single earner like tourism, and sudden policy shifts without testing. When those come together, the first people to feel the impact are drivers in a petrol queue, patients waiting for medicine and families cooking without gas.
Sources: Wikipedia: Sri Lankan economic crisis (2019–2024); Wikipedia: 2022 Sri Lankan protests (Aragalaya); original reporting by Business Insider and Bloomberg (2022).
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