Sri Lanka’s Economic Crisis

In August 2021, Sri Lanka announced a state of economic emergency due to a lack of foreign exchange reserves for necessary imports such as food. Since the Easter Sunday terror attacks of 2019, followed by the epidemic, tourism, a major source of revenue for Sri Lanka, has declined.

Reasons Cited for the recent Economic Crisis: Due to dwindling foreign exchange earnings, import restrictions have been imposed, resulting in food shortages.

• With soaring food prices, retail inflation has reached a decadal high. The rice harvest and Sri Lanka's major export, tea, are in jeopardy due to a government-ordered move to organic cultivation
• Because it no longer has the funds to import oil, the country's lone oil refinery has been shut down.
• Sri Lanka had to pay $4.5 billion in 2022 to service its sovereign liabilities. China, like Japan, has just approximately 10% of Sri Lanka's debt stock. The International Monetary Fund has already bailed out Sri Lanka, most notably in 2016, but the country abandoned the programme in 2019 due to harsh conditions and is hesitant to approach the IMF again.
• Sri Lanka lost the unviable Hambantota port to China for a 99-year lease in 2017 due to its inability to service its debt.