How Sri Lanka Is Diving Into A Deep Economic Crisis!

Sri Lanka is facing a massive financial and humanitarian crisis that could result in bankruptcy this year as inflation rises to record levels. According to World Bank estimates, five lakh people in the nation have fallen below the poverty line since the pandemic struck. This is a huge setback and reversal to the socio-economic progress made in the last five years.

The meltdown was caused by the immediate impact of the Covid crisis and the resultant loss of tourism. Meanwhile, high government spending and tax cuts eroded state revenues. Also, the government had to make vast debt repayments to China and foreign exchange reserves hit the lowest levels in a decade.

As Sri Lanka’s economy continues to nosedive, angry citizens have called on the country’s president to resign. Amidst the rising prices of food and fuel-two men collapsed and died over the weekend in separate incidents while queuing for scarce essential goods.

Mr. Rajapaksa was elected in 2019 with a landslide victory after promising to restore security to the country in the wake of the Easter Sunday terror attacks. But, his government owes £21 billion to lenders, despite having just £1 billion of foreign reserves remaining in the bank.

The following developments have occurred in Sri Lanka recently:

  • An inability to import food has caused prices of essential commodities like rice, daal, and milk powder to triple since last December. Food shortages were exacerbated by the ban on chemical fertilizers-leading to a drop in agricultural yield.
  • Both men were over the age of 70 and suffered from heat exhaustion after queuing up for fuel for nearly six hours in temperatures exceeding 30ºC.
  • Last Sunday, the central government announced that it was canceling school exams throughout the country, as it had run out of power.
  • Ripples in the healthcare system: There has been a shortage of medical supplies in hospitals.
  • Daily power outages have become commonplace and Sri Lankans have been forced to collect firewood to power their homes. Colombo has requested its citizens to use electricity and fuel

“We need to get the Rajapaksa government to get out if they cannot manage the crisis that the country is experiencing and they do not have experts in their cabinet to manage the economy,” said one Colombo resident, who did not wish to be named due to fear of retaliation.

Political parties and citizen groups have launched protests around the country. They have accused the government of being responsible for the economic crunch. The main opposition party in Sri Lanka’s Parliament held a demonstration near the president’s office on Tuesday demanding Rajapaksa’s resignation.

In an attempt to appease Sri Lankans, Mr. Rajapaksa has since announced that his government will approach the International Monetary Fund for a bailout. The government had earlier resisted dealing with the IMF, claiming that this would undermine the country’s interests. Its latest decision marks a policy shift.

However, the decision seems to give little hope to the common masses in a country riddled with corruption and mismanagement of resources.

References: India Times, The Diplomat, The Telegraph


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