Srilanka a beautiful Island country is known for its cool beaches, great tourist destination and friendly and loving nature of the fellow citizens of the country. However, the peaceful and fun loving country is going through the worst crises the world has ever seen. Srilanka as an entire nation is going through the worst phase of economic crises. They don’t have enough foreign reserves, they have run out of petrol and diseal.
Srilanka is facing acute shortage of food, water, electricity and basic supply. Once a peaceful nation has now people in the streets fighting and burning properties for their survival. However, what caused Srilanka to go through just a downward terrible phase of economic slum. Lets look at the details one by one-
The biggest factor attributing to the crises has been the mismanagement of the economic policy by the ruling party for several years. The ill-fated and haphazard decisions of banning the use of chemical fertilizers and deep tax cuts promised by President Rajapaksha during his 2019 election campaign months before the COVID-19 pandemic had a huge negative impact on major tourism sector and also stopped foreign remittances.
This economic crises of Srilanka did not just happen suddenly. It all started a couple of years back during the time when the island country has already spent 70 percent of its foreign reserves. This is where the main problem lies. Srilanka has been over-reliant for China for their economic reform. Due to China’s arbitrary, today the country is just left with $2 billion in foreign reserves. In addition, Sri Lanka also has a whopping $7 billion in debt due in 2022.
Sri Lanka has been caught in a vicious cycle of lending money from China for infrastructure projects and being unable to pay them back, resulting in Sri Lanka having to either give up control of the projects or take out other loans in order to pay China back. Moreover, China’s interest rate for loans is much higher than Asian banks. Therefore today, Srilanka is just in debts and has even no money to buy food for its people.
Thereby an economic reform has to be made on an urgent basis and its over dependency of China has to be stopped. Things are worst for the country at this stage and any bad decisions might lead to a total collapse of the entire nation.
