Reason economic crisis in Sri Lanka

Reason economic crisis in Sri Lanka

 Like the Roller Coaster, now Sri Lanka's economic crisis has brought this country to a point where it is almost impossible to recover. The economic crisis of Sri Lanka, which has a population of 22 million people, has made this country headed for destruction which has the potential to make it a failed state. Sri Lanka is on the verge of bankruptcy and has defaulted on its foreign debt this year amounting to US$ 7 billion. Every year this country has the burden of paying its foreign debt regularly of US3.5 billion until the year 2026. According to official records issued by the Sri Lankan government, the country's debt reaches US$ 51 billion. 




In a crisis like this, this country is not only unable to pay its debt installments, it is no longer possible to pay the interest. This country's mainstay income from the tourism sector has also decreased drastically due to the Covid-19 pandemic and also increasingly uncertain security factors. The value of this country's currency is now only 20% when compared to the value of the currency before the crisis, resulting in skyrocketing prices for basic necessities and fuel. Prices of basic necessities have increased by almost 60%. The most worrying thing is that this country's money reserves have been depleted, so that this country is no longer able to import basic needs such as food and fuel and medicines, The economic crisis experienced by Sri Lanka was exacerbated by the skyrocketing world fuel and food prices as a result of the war between Russia and Ukraine. 

The foundation of Sri Lanka's economy has indeed collapsed and this collapse has systemic effects on people's daily lives because the government no longer has the money to pay for the import costs of basic necessities and fuel and also pay its debts. In a situation like this, the long queues of the Sri Lankan people to buy fuel and gas are getting longer and have become part of people's daily lives. Even if Sri Lanka is still able to survive, it is only because this country is still owed by India in the form of fuel. This economic crisis has a systemic impact that causes inflation in this country to skyrocket and has a direct impact on the lives of the poor and other vulnerable groups. 

Another impact caused by the deepening economic crisis is the reduction in school hours as well as working hours. The government urges the people of Sri Lanka to stay at home as much as possible to save on fuel use.
Every day, the electricity is cut off for at least 3 hours to save energy. According to a report released by The United Nations World Food Program, 9 out of 10 families in Sri Lanka reduce their spending by eating less. As previously discussed, this economic crisis has had a major impact on the poor, so that currently there are 3 million people who need humanitarian assistance so that they can eat and survive. In the health sector, medical officers have even used social media to openly request assistance for medicines and medical equipment because supplies are running low. Based on the analysis of economists, one of the causes of this economic crisis is financial mismanagement and rampant corruption in this island nation. 

This country has been ruled by the Rajapaksa family and their cronies for more than 20 years. The recent wave of protests and violence that has swept the country has succeeded in forcing some members of the Rajapaksa dynasty to resign. One of Sri Lanka's President's brothers who served as prime minister has resigned. Likewise, another brother and cousin of the president has resigned from his position as Minister. However, it seems that until now Sri Lanka's President Gotabaya Rajapaksa has refused to resign. Another factor that also triggered this economic crisis was the security factor due to the church and hotel bombings that occurred in 2019 which claimed the lives of 260 people. This deteriorating security situation has a direct impact on Sri Lanka's income from the tourism sector, which so far has contributed greatly to foreign exchange. The policies taken by the previous government, such as cutting taxes and banning the import of fertilizers, actually triggered an increase in the price of basic commodities such as rice, thereby triggering inflation. 

Inevitably, Sri Lanka is now heading towards an almost unavoidable destruction.
The Sri Lankan government has run out of money to pay its foreign debts and also the cost of importing food, forcing the country to seek financial assistance from the International Monetary Fund (IMF) and China in order to just survive. However, negotiations with the International Monetary Fund (IMF) to obtain a bailout package also hit a stalemate which resulted in the country being in a state of bankruptcy. For international financial institutions, Sri Lanka is no longer a suitable country for loans because there is almost no guarantee that this country can repay its loans. Currently, donor countries are also experiencing economic difficulties due to rising fuel prices and basic needs due to the war between Russia and Ukraine. 

Even if there are still donor countries that can help Sri Lanka to survive, the number is certain to be very small. This situation was exacerbated by a wave of public protests that were increasingly squeezed and hungry which triggered a political crisis. For the past 2 months or so, protesters have occupied the entrance to the office of the president of Sri Lanka, demanding the resignation of president Gotabaya Rajapaksa because they are considered to be the cause of the economic crisis in this country due to mismanagement of the economy and rampant corruption. 

Today protesters have occupied the courtyard of the presidential palace to demand the resignation of Gotabaya Rajapaksa. 
Restrictions on the right to freedom of expression such as the imposition of a curfew will not solve existing problems as long as the root causes are not resolved, and on the contrary will trigger a deeper crisis of confidence. The bankruptcy announcement which was officially issued by the Prime Minister of Sri Lanka Ranil Wickremesinghe 2 days ago made this country no longer in the category of developing countries, but into the category of bankrupt countries The multi-dimensional crisis currently being faced by Sri Lanka is not impossible in the future to make this country a failed state. History shows that when people are hungry, things that have never been imagined before can happen. Hopefully what happened in Sri Lanka can be a lesson for all of us.



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