Due to several factors, foremost of which is the bleak Corona virus crisis, Sri Lanka is facing a major financial and humanitarian crisis, with fears of its bankruptcy in 2022 due to the rise in inflation and food prices to record levels, as well as the depletion of state
The collapse faced by the government led by President Gotabaya Rajapaksa, began with the direct impact of the Corona virus crisis and the deterioration of tourism, and then quickly exacerbated by high government spending and tax cuts, which eroded state revenues, along with the repayment of huge debts to China, and the arrival of foreign exchange reserves to Its lowest levels in a decade
Meanwhile, inflation was driven by the government printing money to pay off domestic loans and foreign bonds.
The World Bank estimates that half a million people have fallen below the poverty line since the beginning of the epidemic, which undermines the efforts of 5 years of progress in the fight against poverty.
Inflation hit a record 11.1 percent in November and soaring prices have left those previously well-off struggling to feed their families, while buying essential goods is now out of the way for many.
After Rajapaksa declared Sri Lanka in a state of economic emergency, the military was given the power to ensure basic items, including rice and sugar, were sold at set government prices, but did little to ease people’s problems.
Anuruda Paranagama, a driver in the capital , Colombo , said poor economic conditions forced him to take a second job to pay for rising food costs and cover his car loan, but it wasn’t enough.
“It is very difficult for me to repay the loan,” he said. “When I have to pay electricity and water bills and spend on food, I have no money left. My family is eating two meals a day instead of three.
The man described how his village grocer opened one-kilogram packets of powdered milk and divided them into 100-gram packets, because his customers could not buy the whole box.
The loss of jobs and vital foreign revenue from tourism, which typically contributes more than 10 percent of GDP, has been significant, with more than 200,000 people losing their livelihoods in the sector, according to the World Travel and Tourism Council .
The economic situation prompted many residents to try to leave the country, as long queues formed at the passport office, with one in four Sri Lankans, mostly young and educated, trying to leave the country.
One of the most pressing problems for Sri Lanka is the huge external debt burden, especially to China, which owes the latter more than 5 billion dollars, and last year it obtained an additional loan of one billion dollars from Beijing to help its severe financial crisis, to be repaid in installments.
In the next 12 months, Sri Lanka will be required to repay an estimated $7.3 billion in domestic and foreign loans, including a $500 million international sovereign bond repayment in January.
However, as of November, available foreign exchange reserves were only $1.6 billion.
Government Minister Ramesh Patirana said that the government hopes to settle its previous oil debt with Iran through “tea”, so that this product, worth $5 million per month, will be sent, in order to provide the much-needed currency.
Parliament member and opposition economist Harsha de Silva explained to Parliament recently that foreign exchange reserves will be negative 437 million dollars by January next year, while the total external debt for the service will be 4.8 billion dollars from February to October 2022, commenting by saying that “the nation You will be completely broke