Sri Lanka sinks deep into an abyss of financial and humanitarian crisis. The island nation fears that it might go bankrupt by 2022. There is a rise in inflation, food prices are sky-high and pandemic-infused disruptions led to the coffers going dry.
Ever since the outbreak began, the World Bank estimated that around 500,000 individuals have slipped into poverty, thus leading to five years of progress in poverty reduction going down the drain. The government faced a meltdown that was led by the strongman president Gotabaya Rajapaksa.
The collapse was fueled by the direct impact of the pandemic that led to the loss of tourism. Things went from bad to worse with accelerated government spending and tax cuts. This led to the destruction in the state’s revenue, massive debt repayments to China, and foreign exchange reserves that were all low in the last decade.
Inflation in Sri Lanka
Inflation reached a new height of 11.1% in November 2021. This left people who were well-off at the beginning of the year struggling to even feed their families by the end of it. Basic necessities became an expense for many.
After an economic emergency was declared necessary products like rice and sugar were given to the people at government-set rates, this did nothing to ease people’s sufferings.
Reports by the World Travel and Tourism Council, state that there was a loss of employment and foreign currency that comes from tourists that add up to 10% of the total nation’s GDP. Over 200,000 people have lost their jobs in the travel and tourism industries. Many young and educated individuals have expressed their desire to leave the nation.
Also Read: India’s Tour of Sri Lanka: Just Another Day In Office
Massive Foreign Debt On Sri Lanka
The nation is under massive debt, particularly to China. This has become the country’s most urgent issue. It owes China about $5 billion in debt and an additional $1 billion loan from Beijing last year in order to cope with severe financial difficulties.
The Guardian reported, that they are paying it back in installments, Sri Lanka needs to return an estimate of $7.3 billion both in domestic and international debts over the time period of 12 months. They even have to repay a foreign sovereign bond of $500 million by the end of January 2022.
Temporary relief initiatives have been resorted by the Sri Lankan Government, like credit lines to import food materials, medicines, and fuel from ally nation India. Currency swaps from India, China, and Bangladesh were also done. Loans were taken to buy petroleum from Oman.
All these loans just give short-term relief and must be repaid swiftly with high-interest rates, increasing the nation’s debt burden.
This does not seem like a good start for Sri Lanka.
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Sources: Economic Times, The Guardian, News On-Air, +More
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This post is tagged under: Sri Lanka, bankrupt, inflation, pandemic, financial, humanitarian, crisis, food prices, poverty, president, Gotabaya Rajapaksa, government, meltdown, strongman, debts, China, loans, Covid, tax, destruction, state, revenue, repayments, foreign exchange, World Bank, reserve, India, economic emergency, necessities, World Travel and Tourism Council, tourism, Bangladesh, Currency swaps, credit lines, The Guardian
