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Sri lanka inflation is killing people because of these 5 reasons

Sri lanka inflation is killing people because of these 5 reasons

In these days and nights, Sri Lanka is gripped by a crisis unlike any other in recent history. While foreign debt is at an all-time high, foreign exchange reserves are at an all-time low, which is a record for the past two decades. When critical items are not available in front of the public, there is a scarcity of them. Sri lanka inflation

Sri Lanka, a neighboring country, is currently experiencing challenging economic conditions. Food and water that are considered to be vital have become scarce due to the severity of the situation. In the case of Diesel-Petrol, the situation is the exact same. It has been necessary, despite the government’s declaration of a state of economic emergency, to organize a food and beverage distribution army. There are signs that Sri Lanka’s foreign exchange reserves are running low, and the value of its currency (the Sri Lankan Rupee) is nearing a historic low. How did “Sone ki Lanka” get to be so horrible, in 5 points, please?

Emphasis on organic farming, ban on fertilizers

This situation is considered to be the result of a recent decision by the government of Sri Lanka, which was implemented immediately. As a matter of fact, the government implemented the decision to ban chemical fertilizers totally in one fell swoop and to mandate 100 percent organic farming. The Agri Crisis in Sri Lanka was wreaked havoc as a result of this abrupt shift. According to estimates, the government’s move has resulted in a reduction of half of Sri Lanka’s agricultural productivity. In addition, there has been a lack of rice and sugar in the country, which has created a difficult scenario. All of this is compounded by food grain hoarding, which is exacerbating the situation. Sri lanka inflation

Tourism sector is in bad shape

Following agriculture, tourism is the second most important sector in Sri Lanka’s economy. According to government statistics, tourism contributes 10% to Sri Lanka’s gross domestic product (GDP). This area has been ravaged for nearly two years, since the outbreak of the Corona virus first spread. Sri Lanka receives the greatest number of visitors from India, the United Kingdom, and Russia. Tourist arrivals came to a halt as a result of the epidemic-related limitations enforced. As the situation in Sri Lanka continues to deteriorate, numerous countries have begun recommending their citizens to avoid visiting to the country. Canada has just issued such an advise, stressing the difficulty in converting one currency into another. This has had a negative impact on Sri Lanka’s ability to generate revenue.

China’s Loop Policy and Foreign Debt

In discussions of China’s debt trap strategy, the natural example of Sri Lanka is frequently cited by commentators throughout the world. China alone owes Sri Lanka more than 5 billion dollars in debt, according to official figures. Furthermore, apart from loan funding from countries such as India and Japan, Sri Lanka also has loan lending from international organizations such as the IMF. Official statistics show that Sri Lanka had a total foreign debt of $ 35 billion as of April 2021, according to the government. This little country, which is surrounded by economic issues, is also burdened with the payment of the interest and installments of a massive foreign debt, which is making the situation worse by compounding the problem. Sri lanka inflation

Falling forex reserves, decreasing currency value

Sri Lanka is likewise experiencing significant difficulties in terms of foreign exchange reserves. Sri Lanka had foreign exchange reserves of $ 7.5 billion just three years ago, when the country’s new administration was created, according to official figures. It saw a precipitous collapse and was valued at only $2.8 billion in July 2021. By November of last year, it had decreased even lower, to a total of $1.58 billion dollars. Sri Lanka does not even have enough foreign exchange reserves to cover the repayment of the debt obligations. The International Monetary Fund (IMF) recently stated that the Sri Lankan economy is on the edge of collapse. The value of the Sri Lankan rupee is declining as a result of the country’s diminishing foreign exchange reserves, which is producing challenges in the foreign exchange market.

Dependence on imports even in things like sugar, pulses, cereals

The fact that Sri Lanka is significantly reliant on imports is also a contributing element to the severity of the country’s current situation. The island nation is also reliant on imported goods for basic necessities including as sugar, legumes, grains, and pharmaceuticals. As a result of the fertilizer embargo, the situation became more acute. At the moment, the conflict between Russia and Ukraine has exacerbated the difficulties faced by Sri Lanka, which is strongly reliant on these two nations for a variety of commodities such as sugar, pulses, and cereals, among others. Following the outbreak of the conflict, the prices of key agricultural commodities have skyrocketed. For its part, the country does not even have adequate foreign exchange reserves to cover the country’s foreign-exchange needs.

Also read:

Can debt-trap diplomacy help Sri Lanka’s economic crisis?

Written by morningnewshindi

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