Sri Lanka is a tourism reliant island

What You Need to Know about the Political and Economic Crisis in Sri Lanka

Sri Lanka has been in the worst economic crisis and political turmoil for over 70 years now. But since March of 2022, the situation has only gotten worse, with food prices increasing by 30 percent, and 22 million residents crippled underneath the 12-hour power cuts.

Understanding the Political Situation of Sri Lanka

On the 1st of April, the president of Sri Lanka, Gotabaya Rajapaksa, invoked a countrywidestate of emergency, considering the shortage of food, medicines, fuels, and other essential items. However, he was forced to revoke it only a week later due to the ongoing protests.

For this reason, the cabinet of ministers resigned on Monday, 4th of April. The newly appointed finance minister, Ali Sabry, was then appointed to take charge; but he too resigned in less than 24 hours in response to the ongoing instability on the island nation.

The Cause for the Economic Crisis

The mismanagement of the government is the most prominent reason for the financial crisis in Sri Lanka. The government withdrew large sums from foreign moneylenders over the past decade in hopes of funding public services. There were natural disasters and artificial ruinations that worsened the situation further.

But it wasn’t until after that Sri Lanka began to experience the greatest fallback. In 2018, the prime minister’s dismissal by the president of the country stirred a constitutional disaster, followed by the massive killings in the 2019 Easter bombings.

Before Sri Lanka had any time to recover, the world was hit by the coronavirus pandemic in 2020,which caused the island to lose access to nearly all overseas markets. As a result, the country began to rely upon its foreign exchange reserves to pay off debts, which shrunk its reserves to $2.2 billion from a whopping $6.9 billion.

To make things worse for Sri Lankans, the currency too devalued in hopes of encouraging remittances and meeting the requirements for securing a loan from the IMF (International Monetary Fund). This has resulted in people being deprived of essentials, withfrustrated savings, and forced to wait in line for fuel.


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