From tea to slot machines

Provincial elections are about to take place in parts of Sri Lanka, in particular the nation’s Tamil-dominated northern province. This is a politically charged moment, as the government is gaining a reputation for being increasingly authoritarian and has faced UN criticism over its track record on human rights. Religious tensions are also mounting.

The elections are expected to be tense, particularly in the north which has been under federal government control since the late 1980s.

Any new period of renewed political wrangles could pose a threat to the country’s economy, which has recovered well since the end of the long-running civil war in 2009.

But all is not well with the public finances. Average incomes are low and tax evasion is rife. With continued and worsening budget deficits, the government is becoming increasingly reliant on foreign borrowings.

Critics suggest that the government’s drift towards an authoritarian style of politics has begun to deter foreign investors.

One group of investors aren’t put off, however – the Chinese. Chinese firms are already picking up infrastructure contracts in Sri Lanka and the government is now actively campaigning to attract more Chinese money.

As a result, China is now one of the country’s biggest suppliers.

With imports outpacing exports, the government last year raised import tariffs and hiked interest rates in an attempt to improve the trade deficit.

Since the government abandoned its previous trading band system early last year, the rupee has sharply depreciated. This could prove a future boon to exports.

When it comes to what exactly other countries buy from Sri Lanka, most people would answer, “tea”. Plantations have been a key part of the island’s economy for centuries.

It is still one of the world’s biggest tea producers …

… but the current government has a rather different vision for the economy. It is promoting super-casinos, aiming to turn Sri Lanka into India’s version of China’s famous gambling island Macau.

With civil unrest rumbling on and the economy looking wobbly, it remains to be seen whether slot machines and roulette wheels will bring Sri Lanka’s the same fame and fortune as its history in the tea trade has done.