Why is Sri Lanka Suffering from Crisis? Let’s check out the best information regarding Sri Lanka’s economic crisis. This article has all the details about the crisis going on in the country. Let’s check it out by thoroughly going through the article.
Why is Sri Lanka Suffering from Crisis?
Well, the news channels and newspapers are flooded with the news about Sri Lanka these days. Everyone is aware of the crisis happening in the country. It is getting worse and everyone is thinking about the factors. There is a very major shortage of foreign currency in Sri Lanka.
Political parties in the state are scrambling to create an all-party government, each day when President Gotabaya Rajapaksa and Prime Minister Ranil Wickremesinghe pledged to resign in the wake of a historic citizens’ protest.
The anti-government sentiment across varied components of the state has triggered a state of political instability. It’s oil-fired by the anti-government protests and demonstrations by the public because of the economic crisis within the country.
The Sri Lankan economy has been facing a crisis due to a significant Balance of Payments (BoP) drawback. Its exchange reserves are depleting speedily, and it’s turning progressively tough for the country to import essential consumer products. Sri Lanka is facing major issues in terms of finance and other spheres.
The Sri Lankan rupee has lost over eightieth of its worth, food prices have skyrocketed by over five hundredth and tourism-one of the country’s main revenue sources has considerably diminished because of the Covid-19 pandemic.
These are extremely tough times for the entire country. The Sri Lankan government is unable to acquire essential imports, as well as fuel. This has led to enervating power cuts lasting up to thirteen hours. Standard Sri Lankan is coping with shortages and soaring inflation.
The country was left with solely $2.31 billion (as of February) in its reserves but faces debt repayments of around $4 billion in 2022, together with a $1 billion international sovereign bond (ISB) maturing in July. Let’s know more about the crisis.
Impact of the Sri Lanka Crisis
Well, before discussing the impact of the crisis, let’s gather the potential information about the factors responsible for this crisis because it is extremely significant for the UPSC candidates. The factors leading the state to the present situation are given below. The first one is economic management by consecutive governments.
This created and sustained a twin deficit – a budget shortage aboard an accounting deficit. Populist policies of the present government: for instance tax cuts. The impact of the pandemic has been huge on the crisis in Sri Lanka. The reductions within the country’s important tourism economy and remittances from foreign staff are due to the pandemic.
Moreover, the reduction in rice production. It is caused by this government’s proposal to ban all chemical fertilizers in 2021, which was later reversed. These factors have made the situation worse in the nation.
Impact on India
Well, the UPSC candidates must understand the impact of this crisis in Sri Lanka on India. A diesel shipment beneath a $500 million credit line signed with India is anticipated to arrive in the state presently. Sri Lanka and India have signed a $1 billion credit line for commercialism necessities, as well as food and medication.
The Sri Lankan government has additionally wanted a minimum of another $1 billion from New Delhi. There have been multiple areas where India is affected by the crisis happening. Crucially, any disillusionment in the state with China eases India’s effort to stay the Lankan dry land out of China’s ‘string of pearls’ game in the Indo-Pacific. It’s in India’s interest to contain the Chinese presence and influence in this region.
Therefore, you must acknowledge the best details and facts about the crisis in the country so that you can answer well in the exam and have immense knowledge about international affairs.
Hopefully, this article has been significant for your UPSC exam preparation. The UPSC exam requires knowledge of every field. The UPSC Pathshala website offers all the information to the candidates along with allowing guidance from the experts.