What Has Happened to Sri Lanka’s Economy?
Sri Lanka is experiencing one of its most severe economic crises in decades, with rising inflation, weak government finances, and COVID-19 shattering the economy.
In Sri Lanka prices of everyday necessities such as medicines, milk powder, cooking gas, petrol, etc. have skyrocketed. The situation is so dangerous that people are facing up to 20-hour-long power cuts and standing in long queues to get petrol and diesel refilled. People in Sri Lanka are having a tough time as their banks are unable to import food, fuel, and medicine leading to shortages. They are even unable to import paper which is why exams have been postponed and newspapers have stopped printing. Food prices rose by 25% last month. In 2019, Sri Lankan President Gotabaya Rajapaksa reduced the 15% VAT to around 7% in order to encourage people to buy more things, so the government can earn tax and the country grows. But instead, the government suffered heavy losses. The COVID pandemic started in 2020. The situation became worse. The government was not able to manage its finances properly. This is why there is such a big problem now.
Now Sri Lanka has taken a loan of a total $ 5 billion from many places. But they have no money to pay back the loans.
India has now decided to help Sri Lanka. India has approved a loan of $1 billion to Sri Lanka. The amount will not be given in lump sum. Whenever they want they can borrow and have to repay that amount. India had done the same earlier as well. India has also offered to give Sri Lanka a $ 500 million loan to buy fuel as well. Even China is giving a loan of $2.5 billion. Even though India and China are helping, Sri Lankan people are having a hard time buying food. They are unable to survive. This is why many of them are leaving the country and coming to India.
