NEW DELHI, (Reuters) – The economic crisis in Sri Lanka has escalated into violence. On Monday, eight people were killed and more than 200 injured. The country’s strong prime minister resigned and his brother the president is trying to find a way out.

The protestors against President Gotabaya Rajapaksa’s power cuts, shortages of essential goods, and increasing prices are demanding that he resign. But the ex-military officer has used emergency powers to keep control.

After a civil war that saw tens to thousands die, the bloody end of which brought about political and physical chaos in this island nation of 22million people 13 years ago has now led to violence and political chaos.

India, Sri Lanka’s north neighbor, has provided billions in loans to the country to pay for essential supplies.

China, which in recent years has made large investments in infrastructure projects as part of what analysts believe is an effort to increase its power across Asia, has not been openly involved in any intervention but has stated its support for efforts by the island country to restructure their debt.

The International Monetary Fund (IMF), which is in Sri Lanka’s crucial negotiations over a rescue plan and plans to restructure the sovereign debt of its citizens, may throw it into chaos.

HAS IT BEEN THIS EASY?

Analysts believe that successive governments’ economic mismanagement has weakened Sri Lanka’s public financial system, leaving it with a surplus of income and inadequate production of tradable goods.

Deep tax cuts implemented by Rajapaksa’s government shortly after taking office in 2019 only exacerbated the situation. The COVID-19 pandemic hit months later.

Sri Lanka lost a large portion of its revenue, including from tourism, which is a lucrative industry. Meanwhile, remittances to foreign nationals dropped due to an inflexible exchange rate.

The rating agencies were concerned about Sri Lanka’s financial condition and the inability of it to repay its large debts. They downgraded Sri Lanka’s credit ratings beginning 2020.

The government relied heavily upon its foreign currency reserves to keep the economy alive. They were eroded by 70% within two years.

WHAT DIDN’T THE GOVERNMENT DO?

The Rajapaksa government initially resisted talks with IMF despite the rapidly declining economic climate.

Opposition leaders and financial professionals urged government action for months. But, the government remained steadfast, hopeful that tourism will rebound and remittances will recover.

The government was eventually aware of the severity of the crisis and sought help from China and India, two regional superpowers that have long fought for control over this strategically placed island.

New Delhi claims to have provided assistance worth more than $3.5 billion in total this year.

A year earlier, in 2022, President Rajapaksa contacted China asking them to arrange repayments for $3.5 Billion of Beijing-debt. In late 2021, Sri Lanka was granted a $1.5 Billion yuan-denominated Swap.

Sri Lanka finally opened negotiations with the IMF.

Even with outside help, there have been long queues at fuel stations, frequent blackouts and some critical medicines running low.

WHAT IS NEXT

Rajapaksa sought the support of all political parties to form a united government. This offer was rejected by many including allies.

Mahinda Rajapaksa (the president’s younger brother) wrote Monday that Prime Minister Mahinda had resigned to allow for the formation of an interim all-party government.

According to a Cabinet spokesperson, the president will meet with opposition politicians in order to form a new government within days.

However, thousands of protestors who have gathered on the streets for several weeks and chanted “Gotabaya go home”, want the president’s resignation.

In an escalated violence situation, pro- and antigovernment protestors clashed Monday in Colombo’s commercial capital. Houses and cars were also set on fire in other areas of the country.

Some business associations in Sri Lanka are relying on politicians for quick resolution.

On Tuesday, Sri Lanka’s crucial apparel industry was represented by the Joint Apparel Association Forum. It released a statement stating that it was critical for a new government.