Anyone in South Asia who believes that China’s Belt and Road Initiative, massive loans, and economic profligacy would propel them to wealth will be shocked if they take even a cursory glance at Sri Lanka’s financial troubles. It is possible to follow Sri Lanka Economic Crisis Reason as a step-by-step tutorial on inviting bankruptcy and economic ruin.
Sri Lanka Economic Crisis Reason
While Sri Lanka’s economic difficulties continue to worsen, its food prices are soaring, and its coffers are running empty, the nation looks to be on the verge of a “humanitarian crisis,” according to the United Nations Development Programme.
According to World Bank estimates, five lakh people in Sri Lanka have dropped below the poverty line since the epidemic hit, which the bank termed a “major setback comparable to five years’ worth of development.”
According to some sources, the rating firm Fitch cut Sri Lanka’s credit rating last month due to concerns of sovereign default on the country’s $26 billion foreign debt.
Last month, the Census and Statistics Department (CSD) released data showing that the country’s GDP declined by 1.5 percent during the third quarter of 2021.
Sri Lanka Economic Crisis Reason
For a nation largely reliant on imports of energy supplies, food grains, essential commodities, and medications, having a foreign reserve of just $2.31 billion is a financial nightmare for the government. The admission by President Gotabaya Rajapaksa that his nation is running a trade imbalance of $10 billion does nothing to alleviate the issue in the least.
In his position as an experienced politician who was regarded as a significant strategist in Colombo’s struggle against the LTTE about a decade and a half ago, he and his brothers should have been well aware of the legacy they were receiving from their forefathers. The tax reduction bonanza implemented in 2019 did not provide the intended effects, resulting in a revenue loss.
Sri Lanka Economic Crisis China Involvement
Early this month, when visiting Chinese Foreign Minister Wang Yi demanded a suspension on debt repayments, the topic of “problematic Chinese loans” came back into the international limelight for the second time in as many months.
Angry over the increasing criticism of the “debt trap,” the Chinese state media accused Indian and foreign media outlets of conducting a politically motivated misinformation campaign to tarnish China’s image and stifle the country’s economic progress. The debt trap story was challenged by certain Chinese critics, who came up with their hypotheses to oppose it, some of which are discussed in this article.
Sri Lanka Economic Crisis Solution
In a December speech in Parliament, MP de Silva said that the “only one way” to get the country out of the current crisis is to request help from the International Monetary Fund (IMF).
He said that domestic measures would be ineffective and that only the International Monetary Fund (IMF) could assist in rebuilding the country’s economy.
Udith Jayasinghe, the then Agriculture Secretary, also warned reporters in late December that the government may have to seek international assistance to help feed the poor and hungry.
“We may need to borrow crops from friendly nations, such as maize, and consider rationing food to ensure pregnant women and those with illnesses are fed. Others may be required to make concessions. “He stated this only hours before another government official removed him.
According to the AFP news agency, his dismissal was not explained by the president’s administration.
On the other hand, the central bank issued a request for foreign cash, including any loose change that individuals may have with them after returning from international travel.
It had previously restricted dealers from exchanging more than 200 Sri Lankan rupees for a US dollar and engaging in forwarding currency contracts earlier in the calendar year.
Since then, the administration has instituted interim measures to alleviate the situation.