Srilanka was short of foreign reserves which led to insufficiency of food, medicine, fuel and other daily needs of the people. Srilanka has defaulted on its foreign debt. Thus economic crisis let social and political crisis, Prime minister Mahinda Rajpaksa has resigned.
Reasons behind Sri lanka Crisis
- “Sri Lanka is a classic case of twin deficits economy,” “Twin deficits signal that a country’s national expenditure exceeds its national income, and that its production of tradable goods and services is inadequate.” Twin deficit is also explained as balance of payment crisis along with foreign reserve shortage.
- The current crisis was accelerated by deep tax cuts promised by Rajapaksa during a 2019 election campaign that were enacted months before the COVID-19 pandemic, which wiped out parts of Sri Lanka’s economy as Sri lanka economy is tourism based economy.
- Srilankan politics is ruled by dynastic influences.
- Flawed economic policy- Sri lanka central bank was using the policy of printing currency to run its economy.
- Chinese debt trap diplomacy deteriorated debt to GDP ratio to unsustainable levels.
Who is helping Srilanka ?
- Srilanka has gone for help to IMF for 4 billon $ loan
- India help around 1 billion $ line of credit. Mission Sagar IX is the mission to help Sri lanka by India.
Srilankan static points
- The father of Sri Lankan Constitution- D. S. Senanayake
- The enactment of the historic 19th Amendment in April 2015 was rushed by the then Prime Minister Ranil Wickremesinghe. It had removed the powers of the President to sack the Prime Minister at his discretion.
- Srilanka capital – Colombo, Sri jayawardenepura kotte
- Official language – Sinhalese, Tamil
- President : Gotabaya Rajpaksa
- Central bank governor: Nandalal Weerasinghe
Related facts to India
- India can be declared under financial emergency under the article 360
- India faced with balance of payment crisis in 1991
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