Reported by – Esha Khanna
Sri Lanka is facing its worst financial crisis since its independence in 1948. The country is running out of foreign exchange reserves because of which they are unable to import fundamental commodities such as food, medicines, milk powder, fuel, and cooking gas. Sri Lanka is also running out of papers due to which it has cancelled all their exams which affected millions of students and their academics. People have to wait in long queues to get petrol, diesel. The Sri Lankan government has approached the international monetary fund for a bailout.
India has aided the Sri Lankan government with one billion dollars as credit so that the country can use the money to buy indispensable commodities.
Sri Lanka’s inflation rate is at 15 percent, the highest inflation rate since 2008. This means prices of essential commodities have been skyrocketing. Currently, both Pakistan and Sri Lanka are in a uniform predicament.
Currently, 277 Sri Lanka rupee is equal to 1 US dollar. This means that if Sri Lanka wants to import, they have to pay a lot of Sri Lankan rupees. Import becoming expensive means it will have a tremendous impact on its domestic market. Maintaining a favourable balance between exports and imports is crucial for any country.
Sri Lanka’s public debt is around 110 percent of its GDP. The country has no option other than borrowing money from other countries and international financial institutions like IMF, the world bank, etc. The country needs to fortify its economy so that it doesn’t collapse.
The repercussions of Sri Lanka’s economic catastrophe can be felt in southern India, with Tamil refugees heading to the southern state from the island nation. Tamil Nadu has received information that around 2000 refugees are likely to arrive in the coming weeks.
The actual crisis started at the end of 2019. Also, its debt heightened after 2010. The country owes a lot of money to other countries and financial institutions. A lot of folks argue that Sri Lanka fell into this trap of crisis due to the short-sightedness of corrupt politicians. Sri Lanka’s economy depends on trade and tourism abundantly. Due to pandemics, this sector failed miserably leading to what Sri Lanka is facing today.