The recent mayhem in the streets of Sri Lanka has left the entire world startled. Sri Lanka’s economic crisis is deepening. The island nation is sitting on a time bomb. The explosion is inevitable and will push Sri Lanka further toward bankruptcy. The current President Gotabaya Rajapaksha is in hiding. He is set to resign from office.
Nine out of ten families are quitting meals due to the dearth of food supply. Schools and colleges have been closed indefinitely due to a power shortage. Civil unrest is worsening. People clashed with police for hours. They tried to burn the residences of Sri Lankan President Gotabaya .
Reasons behind Sri Lanka’s economic failure:
There are multiple compounding factors such as low tourism, debt crisis, financial mismanagement, and corruption. The pandemic and the Russia-Ukraine crisis have alleviated the misery. Sri Lanka’s economic crisis is forecasted to worsen further in two years.
Fewer Tourists, Less Gain, More Pain:
The island nation was bustling with tourism. Tourism was the main source of income for Sri Lanka. There has been an 80% decrease in the tourism avenues of the country. The falling Sri Lankan rupee and the fuel shortage have made the matter worse.
The 2019 Eastern bombings killed around 260 people in churches and other public areas in Colombo. This led to a sense of fear among the international community. Tourism declined due to high violence and disorder. The pandemic is also to blame. COVID-19 was responsible for the decline in revenues due to restrictions put up by different countries.
Sri Lanka’s Debt Crisis:
The Asian Development Bank has classified Sri Lanka as a “classic twin deficit economy.” The expenditure exceeds the income. The production of services and goods is inadequate to support the economy.
It has taken huge debts from International Monetary Fund, China, Japan, India, and other powerful countries. The reserves have dried up. There is only $2.31 billion in its reserves but it faces a debt repayment of $4 billion in 2022.
Government Mismanagement:
The current scenario is the result of the deep cut in tax rates promised by the Rajapaksha government when it came to power. The ban on chemical pesticides had further proved a bane for the economy. There was a drop in the critical rice crop which hit the farmer’s economy. Rampant corruption in the government due to dynasty politics is also a major reason for the economic failure.
Gotabaya in Hiding and His Resignation:
The government’s failure to curb the crisis after repeated tall promises have made the public angry. The streets of Sri Lanka are filled with people who are protesting against the government. A group of people tried to burn down Rajapaksha’s house and vandalized the nearby areas.
Meanwhile, Gotabaya is in a hideout. People are after his life and he is running away to save it. Gotabaya is under paramount pressure to quit. The whole of Sri Lanka is under fire right now. Prime Minister Ranil Wickremesinghe has declared that the economy has “collapsed” in June 2022. They are unable to pay for essential commodities.
Who is Helping Sri Lanka During Hard Times?
The IMF will begin discussions on a possible loan plan with Sri Lanks in the forthcoming days. Sri Lanka has devalued its currency. Around 360 Sri Lankan Rupee is equivalent to $1. It has stocked up inflation which is adding much pain to the already grieving public.
Sri Lanks has asked for further help, fuel, and a loan from India and China. Countries like Japan, Australia, and the USA have loaned a few hundred million dollars. India and Sri Lanka have signed a $1 billion credit line to import food, medicine, fuel, and other essential commodities. It is hopeful to receive another $1.5 billion in aid from China.
The dark times for Sri Lanka are not over. The fuel and wheat prices are skyrocketing due to the Ukraine-Russia crisis which might catalyze the problem. The international community is helpful but cautious due to Sri Lanka’s continuous debt trail.
