Sri Lanka economic crisis on the verge of bankruptcy

Sri Lanka economic crisis on the verge of bankruptcy

Sri Lanka is surfacing a economic crisis doubting to go bankrupt in 2022. The inflation increased to all time high. Also, food prices are at record high and its treasure wealth cease to flow.

Inflation hit a record high of 11.1 percent in November and increasing prices have left helpless who were already struggling before.

After Rajapaksa announced to be Sri Lanka in economic crisis, the military came into power to provide essential goods to the citizens of the country. Selling rice and sugar at the government prices.

Causes for Sri Lanka economic crisis

The downfall faced by the government, overseen by the president Gotabaya Rajapaksa is pointed below: –

  • Impact of covid emergency.
  • Loss of tourists due to lockdown.
  • Failure of government spending on constructions on high rise buildings.
  • Tax cuts decaying state funds.
  • Huge capital repayments to China and other foreign exchanges.
  • December food prise inflation rise from 17.5 percent to 22.1 percent.
  • Sudden decision by the Rajapaksa to cultivate organic crops instead of fertilizers, without any guidance forced the farmers to stop the agriculture. Which led to food shortages in the country.

Also, increased the prices of food by 50 percent.

  • Government decided to relief the citizens by swapping currencies from India, Bangladesh and China to buy petrol from Oman.

But this method provides short term relief and have to pay back these countries in high interest rates.

  • Meanwhile, inflation triggered the government to pay off private loans and foreign bonds.

According to The World Bank calculation 5 million people are under the category of below poverty line (BPL). The figures quoted by the world bank, since the beginning of pandemic. Henceforth, the citizens were fighting poverty from past five years.

Debts to be paid 

In order to overcome from this situation, the island nation has to repay the following:

  • $7.3 billion in domestic and foreign loans for next one year.
  • Including $500 million foreign sovereign bonds due in January and till November available foreign currency reserve was only $1.6 billion.
  • Need to clear the debts in exchange of currencies from neighbouring countries for petrol from Oman.

Sri Lankan government is trying their level best to solve this economic crisis. People are reluctant to get help from their government but the government is in itself of a helpless state. Hope one of the countries help this island nation to evolve from this situation soon.