Sri Lanka: Why is the country in an economic crisis? The Major Reason why Sri Lanka breakout in Capital

                                    

                                                       Economic Crisis in Sri Lanka 

Just located southeast of India, Sri Lanka is a hidden gem of the Indian Ocean. Beyond its ancient ruins, beautiful beaches, and amazing wildlife, the island nation has many other stories. Sri Lanka has a very amazing History from the very past. 

   Sri Lanka has a population of about 20 million people, almost equal to the population of Texas. The island is rich in natural resources and has a diverse economy based on agriculture, mining, fishing, manufacturing, and tourism. Sri Lanka is enriched in its variety of flora and fauna. Its natural resources and many things are unique.

Now News has come that Srilanka has facing many problems. Which are really very impractical states for the citizen living there.

Sri Lanka imposes a curfew after the president declares a state of Emergency.

                               
Before this thousands of people were out on the streets protesting. The current situation in Sri Lanka is really very Bad. 

In addition to food shortages, people have to suffer through petrol and diesel scarcity too.

The enraged people in Sri Lanka tried to attack the President's residence."

There they were met with water cannons and tear gas.

  All of this, 1st we have to Understand the condition of Srilanka right now. Let's Begin (:

  In Feb, Sri Lanka's foreign currency reserve was 2.3 billion$. Gradually it fall down and became very low. You may not know but in the 1900s Sri Lanka was one of the fastest-growing countries in Asia. But there are many things happen that between the intervals and a lot of enormous consequences faced by Sri Lanka.

As we know to run a country must have the Foreign Reserve if the country is based upon other nations for survival and for good growth. If a country has a low foreign currency reserve, it is quite difficult for it to import goods.

Source: Central Bank of Sri Lanka

                      

We should have a reserve to run a country otherwise it is struggling to import Goods.

It faces debt payments of 4 billion $ for the rest of this year.

In Sri Lanka, it is difficult to buy Sugar, cereals pharmaceuticals, and many more.

It is becoming increasingly difficult to import these. Leading to rapid inflation in the prices of those basic commodities in the country. There is a high inflation rate.

   In last month only there was a 25% of inflation rate people were facing difficulties to purchase even the basic things.

On top of it, there is an electrical problem and a crisis of energy. Because the fuel is also imported from other countries. People are getting electricity for only 4 hrs/day or  I think it has decreased till today because the condition is happening even worse. Where there are too many power cuts.

People are not getting diesel and petroleum products. 

It has affected the newspaper and printing industries too. Newspapers have to minimize their prints because of the shortages in printing materials. You can just imagine that the material required to print is not available in the whole nation then what is worse than that you can just imagine in this small thing.

School exams have been post phoned. Sri Lanka canceled exams for millions of school students as the country ran out of printing paper with Colombo short on dollars to finance imports, officials said Saturday.

      Due to their severe food and economic crisis, people have started fleeing their country. The first set of refugees was found running from the country by boat to India. People are so much desperate to run out of a nation because they thought that if they live there then they may die because of starvation.

Sri Lanka went to too many countries for basic help. They approached china for help too. Srilanka is deep in China's debt. Sri Lanka requested china to restructure the debts.  

The Main Que came here is How Sri Lanka faces such a thing, What's the main reason for this crisis?

So there are multiple reasons for this rather than a single reason.

In 2018 Sri Lanka was one of the world's destinations for tourism.

Hundreds of thousands of foreign tourists visited this country. About 12 -13% of Sri Lanka's economy's GDP relied on tourism.

    In April 2019 there were multiple bombings in the country, Now it is known as Easter Day Bombings. Three churches and three hotels were targeted across several cities.

In that bomb barding, 269 people were killed in which 45 of them were tourists (Foreign Nationalists). So you can imagine what this one day wrecked tourism.

 

After this, in March 2020 the Covid 19 pandemic struck shutting down tourism all around the world.

As we know 12-13% of the country's economy relied on tourism the entire sector collapsed.

Here one of the crucial things happens from one decision of the government.

The Government made mistakes too. The president of Sri Lanka was in the power in 2019 after winning the election. After he came to the power he promised that he will revive the economic growth of the country. Another promise was to cut down the  VAT(Value Added Tax)to halfway across the entire state.

                    

                                                       Vat rate of Sri Lanka 

VAT used to be charged at 15% before this the simple reason for the cut was that if people paid less tax, they would spend more with increasing consumption there would be more economic growth. There is nothing wrong with this logic. This worked out successfully in many instances but it needs to be executed with the right timing with the right planning.

The tax cut came into effect on 1st Dec 2019. 3month later Covid 19 pandemic hit. The logic was fair and people consume more in reduction of tax but lockdown occurs people will unable to go out to consume things.

The idea/logic came out opposite with the enormous consequences faced by Sri Lanka. So this is also a major reason for the crisis and many hindrances arise there.

Political instability has been seen there and nepotism has been seen a lot in this country because in the history of Sri Lanka all the major posts and high-ranking posts are occupied by a single-family. We can consider that this can have a heavy impact on the nation.

 PM and President of Sri Lanka      President Gotabaya Rajapaksa

                                                      Prime Minister  Ranil Wickremesinghe

Now the situation in Sri Lanka is very weak. Around 26 Ministers in the government have submitted their letter of Resignation to the PM.

But President and PM haven't resigned yet.

People are furious and protestors are up to PM house around 100k people protest at Pm house.

That's so amazing. 

As a Blogger, I can say that if there is good politics without nepotism and no corruption having a  strong vision then that country can go ahead. So a visionary leader, stable government, and high independency should be there to grow or Speed up the development of the nation.

Thanks, (: