Shri Lanka Economic Crisis: Get to Know Everything Happened in Sri Lanka
Months of protest against the Economic crisis in Sri Lanka reached an apex on Saturday when thousands of people gathered on the roads of Columbo and witnessed violent protest. An angry mob stormed into the PM and president’s house and set the PM’s house on fire. Demonstrators demand the immediate resignation of president Gotabaya Rajpakshee, but amidst rumors over the president’s location, political turmoil continues. Shri Lanka Economic Crisis: Get to Know Everything Happened in Sri Lanka by reading this article. here you will know all the facts that destruct Shri Lanka.
Srilankan speaker said that Gotbaya Rajpakshee will give their resignation on 13th July, and on 20th July, the new president will be elected.
Timeline of Sri Lanka Economic Crisis
- Eastern bombing took place in Sri Lanka where 3 churches and 3 luxurious hotels in columbo were attacked in a series of terrorist suicidal explosions, more than 270 people including, foreign nationals died, and this incident destroyed Sri Lanka’s tourism industry.
- Sri Lanka is an island country, so it massively depends on its tourism, and this is a major source of foreign currency, it contributes 13% of GDP, and after this revenue, from tourism is declining from 7.5 billion dollars in 2019 to 2.8 billion dollars.
The wrong political decision by Government while the election campaign in 2019 was to cut taxes and reduce VAT to 8% from 15%. These types of decisions reduced Shri Lanka revenues and made the economic condition worse.
COVID-19 crisis has affected all the countries of the world and the lockdown crippled whatever was left of tourism and the economy of Sri Lanka, and the government was forced to spend more to save the country’s economy.
May 2021when Sri Lanka Economic Crisis raised
- Another wrong political decision that cause Sri Lanka Economic Crisis, a blunder was that the president of Sri Lanka wanted SL to become a nation of 100% organic farming as a result, it banned the import of fertilizer & agriculture chemicals. SL thought this would save foreign currency, but actually, it was counter-productive, and this ban resulted
- In Crop failure increased the prices of food items, and inflation hit a new height & the situation got worse.
- Economic mismanagement by the successive government causes the Sri Lanka Economic Crisis.
- Imports were greater than export, expansion was more than earnings, huge trade deficit, and budget deficit.
- IMF said that ‘public debt had risen to unsustainable levels. The fund is only 2.31 billion dollars & it had to repay 4 billion dollars’.
Current Economic Conditions of SL
- Fitch places 13 SL Banks on Rating watch negatively.
- Sri Lanka defaults on 51 billion dollars in external debt.
- More than 5,00,000 people have fallen into poverty in recent days.
- Critical surgeries are being canceled.
- Daily blackouts and wide-scale protests are everywhere.
- Bankrupt Sri Lanka asks citizens abroad to send cash home.
Debt history of Sri Lanka
- It owes 11.8 billion dollars through the sovereign bond.
- It owes 4.6 billion dollars to the Asian Development bank.
- It owes 3 billion dollars to Japan and China.
What India is doing for Sri Lanka Economic Crisis
- Since January, India has given 2.5 billion dollars and a line of credit of 500 million dollars in February.
- Four consignments totaling over 1,50,000 tons of jet aviation fuel, diesel, and petrol have been sent.
- India has extended a 400 million dollar currency swap.
- India has also deferred payments owed by the central bank of SL owned to the Reserve bank of India under the Asian clearance union worth 700 million.
The way forward
First Sri Lanka needs to end its political turmoil and form a stable government and then receive a bailout package from IMF with certain conditions like increasing taxes, cutting subsidies, and decreasing unproductive expenses.