Printed on Thu Sep 29 2022 7:53:14 PM

Reasons behind the economic catastrophe of Sri Lanka

International Desk
economic catastrophe of Sri Lanka
There are several main reasons for the current economic crisis in Sri Lanka. A country's economy has some internal and external sectors. And with the foreign currency of this external sector, Sri Lanka is facing this big problem today. The economy of Sri Lanka is a service oriented economy. Tourism is a major source of income. Tourists have stopped coming to the country for the last two years.

As a result, the tourism sector in Sri Lanka has suffered and their income has declined. The dollar did not come to the country. And due to non-arrival of dollar, imports have stopped and there has been an import crisis.

Second, the price of petroleum has risen several times over the world. Not just the Ukraine-Russia war. There are also some global crises. All in all, the price of petroleum has gone up. That, of course, increased before the Ukraine war. Now it has increased even more.

To overcome the energy crisis, they have to import energy from other countries. What used to cost $40 a barrel is now $140 dollar. If $100 per barrel goes up, it would need a huge amount of foreign currency for a country to import millions upon millions of barrels of petroleum. There was the crisis of foreign exchange for a long time. On the other hand, huge foreign exchange is being spent to import petroleum.

In addition, Sri Lanka borrowed from China for some major infrastructure projects. If a project is dependent on a foreign loan, the loan has to be repaid in dollars at an annual interest rate.

As a result, if foreign currency does not come, they cannot be repaid. This is where their foreign exchange crisis came from. When a product cannot be imported, the price of what is produced in the country also goes up.

Everything has to related with petroleum. As its price increases, so does the cost of agriculture, transport and production. For this, petroleum is a basic product, which is involved in all production. Due to this, the production of electricity in the country is almost stopped.

As a result, they have to spend hours without electricity. If the price of petroleum rises globally, then the importing countries will suffer huge losses. This situation was created in Bangladesh in the early eighties of the twentieth century.

However, the situation was not as dire as in Sri Lanka. But went closer. Bangladesh does not earn as much from tourism as Sri Lanka. Our country has its own gas. As a result, Bangladesh does not have to import the required amount of petroleum. Naturally, Bangladesh did not fall into such a dire situation due to many equations. But Sri Lanka is in great danger.

India, meanwhile, has pledged $150 million in loans to Sri Lanka. If I need a bowl of water, and someone there gives me a teaspoon of water, but my water crisis is going on. That's exactly what happened. Such micro-credit will not play a very leading role in an economy. They can now seek low-interest loans from the World Bank or rich nations.
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