News Highlight
While business chambers and affluent citizens are seeing a return to normalcy, most others in Sri Lanka are acutely feeling the impact of the economic crisis.
Key Takeaway
- Sri Lanka, a country of 22 million people, is under unprecedented economic turmoil, the worst in seven decades.
The factors that led to Sri Lanka Crisis
- Economic Factors
- The Easter bomb blasts in 2019 in churches in Colombo resulted in 253 casualties, dropping the number of tourists sharply and leading to a decline in foreign exchange reserves.
- Political
- The newly led government in 2019 promised lower tax rates and wide-ranging offers for farmers during their campaign.
- The quick implementation of these ill-advised promises further exacerbated the problem.
- COVID
- The Covid-19 pandemic in 2020 made the bad situation worse.
- Exports of tea, rubber, spices and garments suffered.
- Tourism arrivals and revenues fell further.
- Organic Farming
- In 2021, all fertiliser imports were banned entirely, and it was declared that Lanka would become a 100% organic farming nation overnight.
- This overnight shift to organic fertilisers heavily impacted food production.
- China’s Debt Trap
- Lanka has borrowed heavily from China since 2005 for infrastructure projects.
- Lanka also leased its Hambantota port to a Chinese company in 2017 after it could not service the USD 1.4 billion debt from Beijing used to build it.
The crisis of Sri Lanka and challenges for India
- Economic
- Sri Lanka’s share in India’s total exports has declined from 2.16% in FY15 to just 1.3 per cent in FY22.
- Social
- Whenever a political or social crisis has occurred in Sri Lanka, India has witnessed a large influx of ethnic Tamil community refugees from the Sinhala Land to India through the Palk strait and Gulf of Munnar.
- Strategic
- Infrastructure projects and other developments of China in Sri Lanka threatened India.
- Political challenge
- The unstable political condition in Sri Lanka may adversely affect India and Sri Lanka’s diplomatic relations.
Content Source: The Hindu