{"id":5552,"date":"2022-12-10T09:29:54","date_gmt":"2022-12-10T03:59:54","guid":{"rendered":"https:\/\/aayushbhaskar.com\/?p=5552"},"modified":"2023-01-11T00:29:18","modified_gmt":"2023-01-10T18:59:18","slug":"sri-lanka-economy-crisis-explained","status":"publish","type":"post","link":"https:\/\/aayushbhaskar.com\/sri-lanka-economy-crisis-explained\/","title":{"rendered":"Sri Lanka Economic Crisis (2022) Explained – What Went Wrong & What’s Next?","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"
The coronavirus pandemic has affected Sri Lanka not just in terms of human lives and job statuses but as a tremendous fall in the economic condition of the country.<\/p>\n
Sri Lanka’s reserves have dropped to nearly $1.6 billion as of November 2021, which has alarmed the entire nation.<\/p>\n
With rapid foreign reserves draining and swindling into a debt trap, the country is facing its worst crisis of all time.<\/p>\n
Sri Lanka is on the verge of bankruptcy, with over half a million citizens sinking into poverty since 2020.<\/p>\n
Our article will cover everything about the Sri Lankan crisis, where it emerged from, and where it is headed.<\/p>\n
Sri Lanka witnessed a soar in debts long before the coronavirus pandemic since 2014.<\/p>\n
However, debt reached around 43% of the nation’s GDP in 2019 and has worsened ever since. By 2021, their foreign debt had increased to 101% of the country’s GDP, causing a significant economic breakdown.<\/p>\n
The country has around $3.5 billion in loans from China alone and a little over $62 billion to the US. The country is also seeking $500 million from India to pay for crude oil purchases amid the crisis.<\/p>\n
Sri Lanka’s inflation hit 11.1%, a record high, in November, and escalated commodity prices to a level never witnessed before.<\/p>\n
This has led to most Sri Lankans struggling to feed their families even with the basic and necessary items.<\/p>\n
The president, Gotabaya Rajapaksa, has declared an economic emergency, and the military has been assigned to take care of essential items like rice and sugar, which are being sold at set government prices.<\/p>\n
However, this has not helped people much after all.<\/p>\n
<\/p>\n
The pandemic did not hit all Sri Lankan economic sectors equally. Industries were more affected when compared to agriculture and services. Since there was low eternal demand, export-oriented sub-sectors were negatively impacted.<\/p>\n
Construction, textile manufacturing, and similar sectors that are more sensitive to demand shocks suffered the most.<\/p>\n
Moody’s, Fitch, and S&P have downgraded their Sri Lankan sovereign ratings due to the negative impact of credit on the country.<\/p>\n
The three greatest reasons behind the rating’s fall were heightened external vulnerabilities, weak fiscal balances, and limited financing options.<\/p>\n
Since people living below the poverty line have also substantially increased, it has largely affected people working in urban sectors like Western provinces because of the industrial impacts.<\/p>\n
Nothern, Uva, Eastern, and Sabaragamuwa provinces have also been drastically impacted due to the already poor population in the area, as per the World Bank update.<\/p>\n
<\/p>\n
“We now buy 100 grams of beans when we used to buy one kg for the entire week’ said a Sri Lankan while also disclosing how the grocery shops have started opening milk powder packets and dividing them into packs of 100 grams each because hardly anyone is able to afford the whole packet.<\/p>\n
The country’s primary source of revenue is tourism, which has tumbled substantially over the last few months.<\/p>\n
Over 200,000 people have lost their jobs in the travel and tourism sector, and the situation is only getting worse.<\/p>\n
Most young and educated citizens of the country are now queuing in the passport office to leave the country as soon as possible and start a new life elsewhere since they are afraid of getting trapped in the crisis and not surviving.<\/p>\n
<\/p>\n