International News

Sri Lanka Declares Bankruptcy

Author : Bozhou Marine

Update time : 2022-07-12 09:58:50

Sri Lanka, a tropical country located on the equator, is known as "a pearl on the Indian Ocean". It is famous for its alpine tea gardens and blue sea beaches surrounded by palm trees. It is a wonderland that many foreign tourists yearn for.

Sri Lanka, however, is in the midst of a severe economic crisis and announced in April that it would stop paying its foreign debt because of the need for foreign exchange reserves to pay for imported goods. In May, the country had accumulated arrears of 78 million US dollars in foreign debt, and had no choice but to declare a default on its debt, becoming the first country to default on its foreign debt since this century.

Sri Lankans storm the Presidential Palace, Prime Minister's Palace

According to Reuters, on July 9, thousands of protesters in the Sri Lankan capital Colombo stormed the presidential residence, opposing Sri Lankan President Rajapaksa and demanding his resignation.

Dissatisfaction has worsened in recent weeks as the cash-strapped country stopped receiving fuel shipments, forced schools to close and rationed gasoline and diesel for essential services. Thousands of protesters stormed the presidential palace, with Sri Lankan troops firing into the air to prevent protesters from occupying the presidential palace until Rajapaksa was safely evacuated. At least 21 people were injured and hospitalized during the protests, including two police officers.

  Gasoline stocks near bottom: School closures, extended power outages

  Beggars are getting "younger"

  Food shortages have emerged.

Statistics show that Sri Lanka has 4 million hectares of arable land, accounting for 61% of the country's land area. There are large tea plantations, rubber plantations and coconut plantations, which are mainly cash crops. In terms of food crops, due to extreme weather such as drought and torrential rain, food production in Sri Lanka has declined in recent years.

Sri Lanka has banned the import of fertilizers, pesticides, herbicides and fungicides from April 26, 2021, in a bid to become the first country in the world to fully implement organic farming. But that backfired, farmers failed to keep up with the sudden shift to organic production, and with it production fell and prices climbed. In November of that year, considering the demands of farmers, the Sri Lanka government officially lifted the ban on the import of agricultural chemicals such as fertilizers, but the relevant import subsidies were not restored, and the import price was still high.

Under the pressure of food and energy prices, the inflation problem in Sri Lanka has become very serious. The data showed that in April this year, the Colombo Consumer Price Index (CCPI) soared to 29.8%, while food and non-food inflation rose to 46.6% and 22%, respectively.

  The outlook for economic growth is bleak

Sri Lanka's current predicament is inseparable from the direct impact of the new crown pneumonia epidemic on tourism revenue, as well as high government spending and tax cuts.

  The national sovereign debt crisis is another gloom.

"After the 2008 financial crisis, Sri Lanka borrowed a lot of money at that time in order to stimulate the economy and there was excess liquidity. However, the country's economic development has always lacked growth points, especially in the face of the epidemic, which led to Sri Lanka's debt repayment cycle becoming more intensive. , it is more difficult to repay debts. Sri Lanka has entered a vicious circle. It takes time to transform its economic structure, but the epidemic has made it difficult to transform, which has led to serious debt problems.“

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