Key Takeaways:
- Sri Lanka is amid its worst economic crisis in seventy years.
- The country owes $51 billion to foreign countries and is working to repay loans.
- New President Ranil Wichremesinghe is attempting to bring Sri Lanka economic stability.
WISCONSIN (CoinChapter.com) — Sri Lanka is suffering its worst economic crisis in seventy years, with its annual inflation rising to 70.2% in August versus 60.8% in July.
Why is Sri Lanka in Trouble?
Sri Lankan tourism is one of the country’s main sources of income. During the Covid-19 pandemic, borders were closed to slow the spread of the virus. Tourists were turned away, and thus it took a major toll on the economy.
Another of Sri Lankan paramount sources of money is based on agriculture, which accounts for 21% of the gross domestic product (GDP). The agriculture industry employs 38% of the nation’s workforce. Primary crops include coconuts, tea, and rubber.
In rural areas, rice is the principal crop and main source of income for 70% of that population segment. Manufacturing is important, too, and accounts for 17% of the workforce.
Debts and Assistance
The country owes approximately $51 billion to foreign nations. The most money is owed to China, totaling 6.5 billion; both countries are discussing repayment plans.
The World Bank has offered Sri Lanka a $600 million loan, and India promised $1.9 billion. G7 countries, which are made up of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, said it supports Sri Lanka’s goals to work through this situation.
Government in turmoil
Due to frustration over the economic crisis, thousands of protesters stormed the home and office of former president Gotabaya Rajapaksa. Mr. Rajapaksa fled the country with his wife and two bodyguards on July 13th.
After traveling to the Maldives, Singapore, and Thailand, they returned to Sri Lanka on Sept. 3.
After Mr. Rajapaksa resigned, Ranil Wichremesinghe took over as president. The country is in a mess as they desperately need food, fuel, and medicines; the World Bank is assisting with these necessities as much as possible to help.
President Wichremesinghe’s administration negotiated an agreement with the International Monetary Fund for $2.9 billion over four years.
Now that Sri Lanka has a politically stable government, solidity is in place. The World Bank said it is genuinely concerned about the economic situation and ready to offer new financing upon continued reforms in a positive direction.
