Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
&gt; But the most boneheaded, bizarre mistake that the Sri Lankan government made was a disastrous plan to shift the entire country to organic agriculture. In April of 2021 the government banned the import and use of pesticides and synthetic fertilizers. This devastated Sri Lankan agriculture, since, as it turns out, fertilizer is really really important. Production of tea — Sri Lanka’s main cash crop — fell by 18% in a year. Production of rice — the main food crop — fell by even more.<p>From <a href="https:&#x2F;&#x2F;foreignpolicy.com&#x2F;2022&#x2F;03&#x2F;05&#x2F;sri-lanka-organic-farming-crisis&#x2F;" rel="nofollow">https:&#x2F;&#x2F;foreignpolicy.com&#x2F;2022&#x2F;03&#x2F;05&#x2F;sri-lanka-organic-farmi...</a> :<p>&gt; By 2020, the total cost of fertilizer imports and subsidies was close to $500 million each year. With fertilizer prices rising, the tab was likely to increase further in 2021. Banning synthetic fertilizers seemingly allowed Rajapaksa to kill two birds with one stone: improving the nation’s foreign exchange situation while also cutting a massive expenditure on subsidies from the pandemic-hit public budget.<p>&gt; But when it comes to agricultural practices and yields, there is no free lunch. Agricultural inputs—chemicals, nutrients, land, labor, and irrigation—bear a critical relationship to agricultural output. From the moment the plan was announced, agronomists in Sri Lanka and around the world warned that agricultural yields would fall substantially. The government claimed it would increase the production of manure and other organic fertilizers in place of imported synthetic fertilizers. But there was no conceivable way the nation could produce enough fertilizer domestically to make up for the shortfall.<p>You don&#x27;t get anything &quot;for free&quot;, and cutting supports like this will inevitably doom a sputtering economy, when the actual solution was almost certainly <i>more</i> government spending, not less.<p>The US is actually lucky to understand this at the deepest levels of policy and law making, with massive aid packages to prevent total collapse. Even Europe tried harsh austerity in the wake of 2008, and the fad lasted way too long there.<p>The Sri Lankan leader&#x27;s hostile attitude towards the Sri Lankan population is what made protesters storm the leader&#x27;s home.