Sri Lankan economic crisis (2019–present)
Ongoing economic crisis in Sri Lanka / From Wikipedia, the free encyclopedia
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The Sri Lankan economic crisis[8] is an ongoing crisis in Sri Lanka that started in 2019.[9] It is the country's worst economic crisis since its independence in 1948.[9] It has led to unprecedented levels of inflation, near-depletion of foreign exchange reserves, shortages of medical supplies, and an increase in prices of basic commodities.[10] The crisis is said to have begun due to multiple compounding factors like tax cuts, money creation, a nationwide policy to shift to organic or biological farming, the 2019 Sri Lanka Easter bombings, and the impact of the COVID-19 pandemic in Sri Lanka. The subsequent economic hardships resulted in the 2022 Sri Lankan protests. Sri Lanka received a lifeline in the form of an Indian line of credit amounting to $4 billion. This substantial credit infusion served to cover the costs of importing essential goods and fuel. As a result, the foreign currency reserves of debt-ridden Sri Lanka experienced a notable improvement, reaching $2.69 billion.[11]
This article needs to be updated. (March 2023) |
Sri Lankan economic crisis (2019–present) | |||
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Date | 21 April 2019 – present (5 years, 2 weeks and 5 days) | ||
Location | Sri Lanka | ||
Caused by |
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Status | Ongoing | ||
Casualties and losses | |||
Sri Lanka had been earmarked for sovereign default, as the remaining foreign exchange reserves of US$1.9 billion as of March 2022 would not be sufficient to pay the country's foreign debt obligations for 2022, with $4 billion to be repaid.[12] An International Sovereign Bond repayment of $1 billion was due to be paid by the government in July 2022. Bloomberg reported that Sri Lanka had a total of $8.6 billion in repayments due in 2022, including both local debt and foreign debt.[13][14] In April 2022, the Sri Lankan government announced that it was defaulting, making it the first sovereign default in Sri Lankan history since its independence in 1948 and the first state in the Asia-Pacific region to enter sovereign default in the 21st century.[15][16]
In June 2022, then Prime Minister Ranil Wickremesinghe said in parliament that the economy had collapsed, leaving it unable to pay for essentials.[17]
In September 2022, a United Nations report said that the economic crisis is a result of officials' impunity for human rights abuses and economic crimes.[18] According to the Sri Lankan finance ministry, the country's foreign reserves had grown by 23.5% from US$1.7 billion in September 2022 to US$2.1 billion in February 2023, representing a US$400 million increase.[19] Sri Lanka teeters on the edge of financial insolvency and has halted repayments on its international debts.[20]