A political crisis in Sri Lanka, where two prime ministers are fighting for power, is scaring away tourists and raising questions over foreign aid, ringing alarm bells for the economy as the currency slumps to record lows.
The turmoil in the Indian Ocean nation that has seen one premier refuse to be sacked, and another battle to prove a majority in a Parliament that is banned from meeting, has caused major upheaval that Sri Lanka cannot afford.
Amid warnings from politicians of a bloodbath if the dispute escalates, tourists are cancelling hotel bookings just as Sri Lankan beaches and major sites like the Temple of the Tooth prepare for peak season.
While no official figures have been given, deluxe hotels have reported cancellations and a critical decline in new bookings in the past 10 days.
“This comes at the worst possible time when people in Europe are making their holiday plans abroad,” a Colombo city hotel executive said.
“We have had a lot of cancellations from the United States.”
Western nations have warned their citizens to be on their guard in Sri Lanka.
“You should exercise vigilance and avoid all demonstrations or large political gatherings,” a British government advisory said.
Tourism is a cornerstone of the economy. More than 2.4 million foreign holidaymakers visited Sri Lanka last year, spending US$3.2 billion (S$4.4 billion). The authorities had been counting on a rise of more than 10 per cent this year.
And whether Mr Ranil Wickremesinghe stays in office or former president Mahinda Rajapaksa takes his place, foreign earnings will be badly needed.
The Asian Development Bank had predicted that the economy would grow by 3.8 per cent this year and 4.5 per cent in 2019, but all bets are now off.
The power vacuum has raised doubts over a US$1.5 billion Japanese-funded light rail project and another US$480 million of US finance for transport and health, a Wickremesinghe minister, Mr Patali Ranawaka, said last week.
The International Monetary Fund was about to announce an agreement on releasing a new tranche of a US$1.5 billion loan to Sri Lanka when President Maithripala Sirisena sacked Mr Wickremesinghe on Oct 26.