Sri Lanka’s economic crisis

06 Apr 2022 Sri Lanka’s economic crisis

Sri Lanka’s economic crisis – Today Current Affairs

• Sri Lanka is currently going through a difficult economic crisis.

Today Current Affairs

Present situation:

• There has been a severe shortage of foreign exchange in the country.
• The Government of Sri Lanka is unable to pay for the import of essential commodities including fuel.
• Due to this, power cuts of up to 13 hours are being done in the country.
• Ordinary citizens of Sri Lanka are also facing shortage of essential commodities and rising inflation.
• Till last month i.e. February, the country’s total money reserves were only left at $2.31 billion, while it is yet to repay the debt of about $4 billion in 2022. The debt also includes a $1 billion ‘international sovereign bond (ISB)’ maturing in July.

Factors leading Sri Lanka to this position : The Hindu Analysis

• Economic mismanagement by successive governments: Successive governments have created and continue to create a dual deficit – budget deficit and current account deficit.
• Populist policies of the current government:g. tax cuts.
• Impact of the pandemic: Damage to the country’s important ‘tourism economy’ as well as a lack of remittances by foreign workers to the country.
• Decrease in rice production: A ban on all chemical fertilizers was proposed by the current government in the year 2021, which led to a drastic reduction in rice production in the country, however, this decision was reversed later.

Collaboration with India : The Hindu Analysis

• Under a $500 million ‘line of credit’ signed with India, a diesel shipment is expected to reach Sri Lanka soon.
• Sri Lanka and India have signed a $1 billion line of credit for the import of essential commodities including food and medicine.
• The Sri Lankan government has also demanded at least one billion dollars from New Delhi.

Today Current Affairs

Why is it in India’s interest to help Sri Lanka?

• Importantly, Sri Lanka’s any disenchantment with China facilitates India’s attempt to keep the Sri Lankan archipelago out of China’s ‘String of Pearls’ game in the Indo-Pacific.
• It is in India’s interest to control Chinese presence and influence in the region.

In this article we mention all information about Sri Lanka’s economic crisis  Today Current Affairs.

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