What Went Wrong in Sri Lanka that Pulled Country in Huge Economic Loss?
After the mass protests in Sri Lanka, President Gotabaya Rajapaksha fled away, after declaring an emergency in the country.
People in Sri Lanka struggled to meet the everyday basic necessities such as power cuts and shortage of food, medicines, and fuel. The country has more than 50% inflation.
There is huge insufficiency of fuel in the country for essential services such as trains, buses, and medical vehicles. The country lacks foreign currency for importing more essentials. Thus, it resulted in a dramatic rise in the prices of fuel.
The government banned the sale of diesel and petrol prices for non-essential vehicles. Thus, the fuel sale in the country remained restricted.
The schools in the country remained shut, and people were asked to work from their homes to conserve their supplies.
In May 2022, the country failed to pay the interest on its foreign debt for the first time. Such failure in paying debt damages the nation’s reputation. It creates a bad image in the international markets and makes it quite hard for them to borrow funds.
Country’s Plan to Tackle the Economic Crisis
After resigning from the president’s position, Rajapaksha fled to Singapore. The Prime Minister of the country, Ranil Wickremesinghe became the acting president. A state of emergency was declared by him in the country. Later on, numerous protesters stormed his office, demanding his resignation.
There is a debt of more than $51 billion to foreign lenders, along with $6.5 billion to China. The dragon has planned to restructure the loans given to Sri Lanka.
The countries of the G7 including the UK, US, Germany, France, Italy, and Japan have supported Sri Lanka in reducing its debt repayments.
Moreover, the World Bank has also agreed to give a loan worth $600 million to Sri Lanka. As well as, India has also offered a loan of at least $3 billion the country.
The International Monetary Fund is also discussing lending a loan worth $ 3 billion to the country. But it may require the country to have a stable government that has the potential to increase the rate of interest and taxes for funding the deal. Therefore, the bailout could be delayed for placing a new administration.
The acting president of the country has said that the government is required to print the money for paying the employees’ salaries. He has also given a warning that it would create high inflation in the country and cause prices to hike.
Moreover, Sri Lanka has also asked Qatar and Russia to supply oil at reduced prices to help the country in keeping the petrol cost low.