Urbanizing Debt: Sri Lanka's Post-War Crisis

Sri Lanka

By Kartik Amarnath
indebtedness, crisis, post-war, infrastructure, banking, credit, neoliberalization, financialization, urban development

This project visualizes the Sri Lanka's many post-war debt crises driven by aggressive urban development.

This project examines the role that Sri Lanka’s urban development agenda has on rising debt in the post-war era. With the end of the war, the ravaged Northern and Eastern Provinces were suddenly opened to a global economy they were closed off from for three decades. The war’s end brought a sudden influx of international capital in the form of urban development and reconstruction projects. These maps visualize the consequence of indebtedness for war affected regions by mapping debt at the international, national, and provincial level.

While the central government boasted Northern and Eastern Provincial GDP growth percentages higher than any other province in 2012 thanks to the reconstruction boom, such growth was externally financed, managed, and produced by foreign entities and the Sri Lankan military. Since the war’s end in 2009, Northern Province road kilometers grew by 168% through military construction, while the Indian government has completed the construction of 50,000 houses for IDPs. According to Sri Lanka’s Ministry of Finance, the percent of GDP growth in the construction sector skyrocketed nationally to slightly over 21% in 2012, and 20%. However, the construction sector accounted for just over 8% of the island’s total employment in 2012, only 1% higher than what it was in 2006 when Northern and Eastern territories and populations were under control of the LTTE and cut off from the rest of the country. The construction boom rebuilt roads but did not rebuild lives. Banks proliferated into war torn regions, occupying important space on newly built roads and capitalizing on families struggling to rebuild lives. The following map attempts to show the interplay between road development and the spatial distribution of banks. This map complicates our notion that reconstruction is inherently positive, as the rebuilding of roads led to further indebtedness for war affected populations as banks began to seek further presence in the North and East. You can hover over the points to see the name of the bank. Data was collected from many Google Maps searches across the various regions of the Northern Province.

Despite GDP growth, the Northern Province has the lowest income-to-expenditure ratio and highest poverty gap index in the country, and GDP contributions from northern agriculture, the foundation of the regional economy, did not increase at all since the war’s end. These statistics are symptomatic a post-war development model meant to attract foreign capital rather than local economic revitalization. The massive investment in infrastructure created a form of connectedness that could open northern (and eastern) landscapes into national and global extractive economies. Such exposure led to a cycle of indebtedness for those who survived on smallholder agriculture for centuries and now had to compete in the global economy after decades of isolation. This is furthermore verified by the surge in banking density (number of banks per 100,000 people) by 177% in the north and 110% in the east between 2008 and 2014 (see Fig. 1), and the Bank of Ceylon’s claim in a 2012 annual report that 19% of their asset growth was attributed to loans in Northern and Eastern Provinces. The following map shows the post-war banking boom. The surge in banking facilitated by neoliberal economic policies had a particularly strong effect in the North and East. If we isolate districts according to how large banking growth has been since 2009 and how high their current banking densities are today, we find that the banking upsurge particularly discriminated towards war torn regions. Data was collected from the Ministry of Finance and the Central Bank of Sri Lanka.

Ironically, state facilitated financialization in war-affected regions was only possible by taking loans from transnational actors such as multilateral banks and large states. In other words, Sri Lankan families were exposed to financialization after the war after state efforts to accrue public foreign debt, which it in turn used to incentivize banks to provide loans – often with high interest rates – to northern and eastern families for resettlement and reconstruction. In the six years between 2008 and 2014 Sri Lanka’s foreign debt more than doubled to Rs. 3.11 trillion, majority being loans from India, China, Japan, the Asian Development Bank, World Bank, IMF, and International Development Association as primary lenders. Given the island’s geostrategic location in the Indian Ocean, these transnational actors financially compete to garner favorability with the Sri Lankan state. However, unprecedented foreign lending and debt accrual for the island has also placed international pressure on the Sri Lankan state to juggle competing geopolitical interests, thereby favoring certain development paths over others, particularly mega-development financed, owned, and managed by extractive foreign entities. The following map visualizes foreign bilateral debt, comparing what it was in 2005 and in 2014. Data for this map was gathered from reports by the Ministry of Finance, Central Bank, and cross checked with multilateral development reports and the media. 2005 was 4 years before the war’s end, and also a year after the destructive Asian Tsunami. We see that despite coming out of an environmental catastrophe in 2005, foreign debt was very manageable compared to what it is now in the post-war era. Post-war development has driven debt far more rapidly than post-disaster development.

The crisis of debt in Sri Lanka shows us how the violence of war doesn’t end with the silencing of guns. Rather, it lives on in the development choices that countries make. In other words, we must complicate the notion of post-war ‘development’ as something inherently celebratory, because such development processes often times exacerbate the violence experienced by many.