Sri Lanka’s economic crisis

 

Ordinary Sri Lankans are facing shortages and rising inflation after the country devalued its currency sharply last month in preparation for talks with the International Monetary Fund (IMF) about a loan programme. Anger at Sri Lankan President Gotabaya Rajapaksa’s handling of the island nation’s deepening economic crisis erupted into violence late Thursday, with hundreds of protesters clashing with police for several hours. 

Due to a severe lack of foreign currency, Rajapaksa’s government has been unable to pay for essential imports such as fuel, resulting in debilitating power outages lasting up to 13 hours.

According to critics, the roots of the crisis, the worst in decades, lie in economic mismanagement by successive governments that created and maintained a twin deficit – a budget shortfall as well as a current account deficit. 

With the pandemic eroding the country’s lucrative tourism industry and foreign workers’ remittances, credit rating agencies moved to downgrade Sri Lanka, effectively locking it out of international capital markets. 

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