Sri Lanka Economy

Sri Lanka Crisis

State of emergency has been declared in Sri Lanka. Social media have been banned. And a curfew has been declared across the island.

Before this, thousands of people were out of the streets protesting. There scarcity of fuel and food in the country. people are enraged.

And Sri Lanka going through a major economic crisis.

The situation in Sri Lanka is very bad, Along with the emergency, they have imposed a 36 hours police curfew.

In additonal to the food shortages, people have to suffer through petrol and diesel scarcity too. The enraged people in Sri Lanka tried to attack the president house.

first, lets understand the situation in Sri Lanka right now.

In February, Sri Lanka foreign currency reserves, where at a mere $2.3 billion compared to January 2020. It had fallen below 70%.

If a country has a low foreign currency reserve, it is difficult for it to import goods. Apart from this, there is a debt payment of $4 million due from Sri Lanka.

In India we think of imported goods as Luxury items, but, Sri Lanka economy relies on imported goods even for basic products like sugar, rice, sunflower, wheat, etc.

Sri Lanka is small country they can not plant all basic daily needs due to lack of space and they import all the basic things from other country . Sri Lanka always facing difficulty from the starting when they fought civil war in 1948 with South Africa. Sri Lanka win but they face so many difficulty and crisis as well as.

Now, Because of low foreign currency reserve again it is becoming increasingly difficult to import all essential nd needy things. There high inflation.

In the last month alone, Sri Lanka witnessed 25% inflation people are facing difficulty to purchase even the basic things. like rice-290kg, sugar-290kg, even a cup of tea is 100 rupees. People are getting electricity for only 4 hours a day. cooking gas is supplied only once a week. boards exam have been cancel even newspapers have to minimize their print because of the shortage in print material.

India is supporting Sri Lanka in other ways as well and we know that Sri Lanka is also a importent part of India. On 17th march, Sri Lanka Finance minister signed a credit of $1 billion with new Delhi. India did a currency swap of $400 million and now, Sri Lanka is requesting another credit line of $1 billion from India. They approached China for help too. A $2.5 billion credit line from China. There have been discussion with IMF and the world bank too.

What are the reasons that Sri Lanka condition is this now

There are multiple reasons for this

 In 2018, Sri Lanka was one of the World top destination for tourism 2018 was a record breaking year for Sri Lanka. 2.3 million foreign tourists visited Sri Lanka economy relied on tourism.

Then in April 2019, there were multiple bombing in the country known as “Easter day Bombing” three Churches and three hotel were target across several cities 265 people were killed 45 of them were foreign national 8 suicide bomber were responsible for the bombings. Sri Lankan citizens, associated with a local Islamic terrorist group. Due to this following month, there was a large scale anti-Muslim violence in Sri Lanka. Homes , shops, car of Muslims were attacked, and vandalised. the government had to imposed a state of emergency in Sri Lanka then as well. They had blocked Facebook then too because Facebook play a important role for creating hatred.

After this, in March 2020, the covid-19 pandemic struck. shutting down tourism all around the world. As we know that 12%-13% of the Sri Lanka economy relied on tourism. the entire sector collapsed. But even a collapse in tourism should not be able to cause this much damage. There are more reasons. The government made mistake too. The Sri Lanka President, Gotabaya Rajapaksa, won the election in 2019 and came into power. In is manifesto he promised that he improve Sri Lanka economic and cut down the value added tax to half. But unfortunately low tax value method is failed so badly and the government had to incur a huge revenue loss. Sri Lanka public debt kept on increasing. In 2019 election president came up with one more masterstroke. He promised that he would convert the country agriculture into organic. This decision is also proved a disaster for Sri Lanka.