The Sri Lankan Crisis |
| Credit: AFP or licensors |
INTRODUCTION
• Sri Lanka has fallen into the worst economic crisis after its independence in 1948.
• Lanka's crisis is prominently due to the lack of foreign reserves in the country, due to which the export power (on which the nation highly depended) has decreased significantly.
• The crisis accelerated after deep tax cuts in 2019 just a few months before the pandemic which led to the collapse of the tourism sector that used to be a significant source of foreign currency.
• The country's foreign reserves have dropped below $50 million. with a total of $51 billion in debt bringing Lanka very close to bankruptcy.
EFFECTS OF THE CRISIS
• People in the country have to wait in long lines to buy essential items because of acute shortages in food, medicines and fuel.
• According to World Bank data, the share of the poor was estimated to have grown to more than half a million people since 2020.
• Sri Lanka's fuel stocks are running out. There have been multiple countrywide power cuts and the street lights have been disabled as gov can't supply enough fuel to power generating stations.
• The rise in prices of commodities has pushed inflation. In April, the country's inflation stood at nearly 30 per cent.
WHAT NEXT?
• The Cabinet got dissolved after the resignation of Mahinda Rajapaksa. Leaving the country without a prime minister hence to bring Sri Lanka out of this economic crisis, the first step would be to have a stabilised government at the Centre.
• Sri Lanka and India have signed a $1 billion credit line for importing essentials, including food and medicine. Sri Lanka has also received help from Lanka Indian Oil Corp (LIOC).
• Tourism picking up after the COVID crisis could've been a levrage but considering the current scenario it doesnt really seem to happen.
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