Sri Lanka crisis: economic promise to go in 10 points

Sri Lanka’s foreign debt stands at about $ 50 billion

New Delhi:
Sri Lanka’s economic crisis continues to worsen. PM Ranil Wickremasinghe warned on Monday that the “next few months will be the most difficult”. However, the ongoing crisis has been raging for several years now.

Here is a 10-point low on the economic crisis in Sri Lanka:

  1. Prime Minister Wickremasinghe tweeted a long thread on Monday citing “unpleasant” facts about Sri Lanka’s economic situation. He said government revenue stands at about Sri Lankan rupee (SLR) 1.6 trillion, while expenditure is currently at SLR 4 trillion. This means that the budget deficit stands at SLR 2.4 trillion, which is 13% of GDP.

  2. Foreign exchange reserves, which help a country pay for imports, are almost empty. “It’s a challenge to find $ 1 million,” the prime minister tweeted. Interestingly, he noted that the country had $ 7.5 billion in foreign reserves in November 2019.

  3. Wickremesinghe added that Sri Lanka needs $ 75 million to pay for fuel. India has provisionally extended a line of credit for diesel shipments. “We are working to raise dollars in the open market to pay for the shipments,” he tweeted.

  4. Sri Lanka is also facing a shortage of medicines and medical equipment. However, this is already in default with his payments. Without going into the details of the possible solution, Wickremesinghe said Sri Lanka should pay 34 billion SLR for four months’ medical supplies.

  5. Sri Lanka’s foreign debt stands at about $ 50 billion, with China’s share estimated at about $ 8 billion. China’s “hidden debt trap” was blamed for the worsening debt crisis when the country embarked on a series of failed Chinese-funded projects. On April 12, Sri Lanka’s central bank unilaterally suspended the repayment of foreign debt.

  6. Sri Lanka has shown great promise after the end of the 25-year-long civil war against the LTTE. “Recent trends such as low inflation, low and stable interest rates, strong external reserves, stable exchange rates, improved fiscal prospects are solid indications that the economy is returning to normalcy,” the central bank noted in 2010.

  7. Sri Lanka’s economy grew by 8.6% in the last quarter of 2010 and reached a growth rate of 9.1% by 2012. This was largely due to a massive pressure for public infrastructure projects and revival of tourism.

  8. Tourism, which contributed at least 12% to GDP in 2019, has become a major source of income. In 2018, the island nation welcomed 2.3 million tourists, the highest ever.

  9. However, the Easter bombings in 2019 and the Covid pandemic a year later destroyed the tourism sector. In 2021, Sri Lanka welcomed only about 1.9 lakh tourists and earned a meager $ 500 million in revenue.

  10. The ongoing Covid pandemic has only exacerbated the foreign exchange situation, with Forex reserves falling by more than 70% in two years. The decision to support organic farming – critics claimed it was due to forex shortages – led to poor agricultural yields. As a result, agriculture’s share of GDP shrank by 2.4% in 2020.

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