Sri Lanka, which is suffering from its greatest economic crisis.The Sri Lankan government imposed statewide seven-and-a-half-hour daily power cuts on Tuesday (March 2, 2022). According to the news agency AFP, this is Sri Lanka’s longest power outage in 26 years. Due to depleting fuel sources, the country has started imposing intermittent power disruptions.
Massive Economic crisis of Sri Lanka
For several years, the island nation has been mired in economic turmoil. To promote spending, the newly-elected Rajapaksa government virtually slashed the value-added tax in 2019. However, the move, combined with the pandemic-affected tourist sector, and also Sri Lanka’s economy. It has left the country in a financial predicament. The Bank of Ceylon issued $35.5 billion on February 23 to pay for a shipment of 40,000 tonnes of petroleum. But it was stranded at the Colombo port for four days due to the government’s inability to pay for it.
Facts and Figures of Sri Lankan foreign exchange and Inflation
- Sri Lanka’s foreign reserves fell by 24.8 percent to $2.36 billion in January 2022, according to figures released by the Central Bank on February 28. This puts Sri Lanka in a difficult position, as it owes over $7 billion in debt that must be paid by 2022.
- The state of the economy has sparked fears that Sri Lanka may default on its loan and will be forced to seek assistance from the International Monetary Fund (IMF), a move that the government has so far avoided.
- According to a Bloomberg study, Sri Lanka had the fastest inflation in Asia in February, with consumer prices up 15.1% from the previous year 2021.
Russia – Ukraine conflict effects on Sri Lankan Economy
The Russian-Ukraine conflict has the potential to harm Sri Lanka’s economy. Russia is one of the country’s main tea importers, and visitors from the conflicting countries account for a significant portion of the country’s tourism. Due to the prolonged crisis and depreciation of the Ruble, Sri Lanka has seen a significant drop in imports and tourism from the region.
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