The beautiful island nation of Srilanka is in deep waters at the moment. Since its independence in 1948, it is the first time that Srilanka has defaulted on its foreign reserves. Currently, the country is in high debt and has declared bankruptcy. Inflation is at an all-time high, and the country faces shortages of necessities. A population of nearly 22 million faces a shortage of food, fuel and medicines. Even worse, there is no paper to conduct students’ examinations. This article has discussed the reasons that led to this significant economic crisis in Srilanka.
DROP IN TOURISM
Srilanka enjoys a brilliant geographic location. It is a beautiful island in the Indian Ocean, surrounded by blue waves from all sides. The country is immensely beautiful, and the people there are amongst the friendliest ones in the whole world. These attributes make Srilanka an attraction for tourists. Moreover, tourism has been a booming industry in the country. A major chunk of Srilanka’s economy relies on foreign travellers. But, since the series of bomb blasts in Colombo in 2019, tourism in the country got affected badly. Foreigners have lost trust in security, and tourist arrivals have dropped by about 80% since 2019, imposing a great threat to the country’s economy.
The unwise policies of the Srilankan government are another reason for the current economic crisis. The new government under Gotabaya Rajapaksa took several steps that were instrumental in bringing Srilanka to this stage of bankruptcy. They cut down taxes on goods and services. Moreover, the government reduced corporate taxes and abolished some taxes. This and reduced tourism affected the Gross Domestic Product heavily. Another insensate decision by Rajapaksa and co. was to abolish fertilizers and to move towards organic farming all of a sudden. And that too instantly after Covid, exports of tea and other important Srilankan crops were already on a low. Due to lower export, there were fewer reserves for imports. The demand for certain goods sky-rocketed against their supplies, resulting in hyperinflation.
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