NEW DELHI

Sri Lanka, known for its tourism, has gone from bad to worse at this time. This is the toughest period for Sri Lanka since independence. From petrol and diesel to milk and other food items, every essential commodity has become so expensive that people are unable to buy it. The situation has become such that an emergency has been imposed in the country and President Gotabaya Rajapaksa has fled the country. But for what reasons did Sri Lanka turn towards this economic crisis? Here it is.

Advertisment

1. The Government's Mismanagement 

For a long time, the Sri Lankan government took large sums of money in the form of loans from abroad for public services, leaving the country in debt. The government ignored expenditure over income, which led to a budget deficit.

2. Tourism 

Advertisment

Tourism is also a very big factor in Sri Lanka's condition. Since the Easter bombings at various churches in Colombo killed 253 people in April 2019, tourists have been hesitant to visit the place. This affected its foreign exchange reserves. In such a situation, the tourism industry was destroyed, which is a part of the 10 per cent GDP of the country. Tourism also came to a standstill due to COVID-19.

3. China's Interference 

The proximity of China has weighed heavily on the island nation. China's strategy is such that in countries where it has increased its investments, political and economic instability have increased rapidly. Pakistan is an example of that. Its economic condition is also not sound. 

Advertisment

4. Prohibition of Fertilizer Imports

To make Sri Lanka a 100% organic farming country, the government has completely banned all fertiliser imports since 2021. This severely affected the food production in the country. Rising food prices, currency depreciation, and to control the rapidly depleting foreign exchange reserves, the Sri Lankan President declared an economic emergency. This decision had an impact on the economy. 

5. Foreign reserve scarcity

Economic mismanagement in Sri Lanka has depleted 70 per cent of Sri Lanka’s foreign reserves with only $2.31 billion left with debt repayment of over $4 billion. Sri Lanka's high dependence on imports of essential commodities such as sugar, pulses, and cereals adds fuel to the economic slowdown as the island nation lacks foreign reserves to pay its import bills. 

Apart from that, Sri Lanka's FDI also declined. According to government data, FDI stood at $548 million in 2020, which decreased by $793 million and $1.6 billion in 2019 and 2018, respectively.

Recently, riots have been happening everywhere in Sri Lanka. There is anger among the people, and Sri Lankans are awaiting President Gotabaya Rajapaksa's resignation.

(Disclaimer: The views of the writer do not represent the views of WION or ZMCL. Nor does WION or ZMCL endorse the views of the writer.)

WATCH WION LIVE HERE

You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.