Explainer: The state of Sri Lankan economy and how did the island nation get here
There was a time when Sri Lanka’s economy showed robust growth, now it’s teetering on the verge of collapse. All within a few years! How did Sri Lanka get here? What went wrong? Let’s understand…
Sri Lanka has borrowed heavily from foreign markets. Its public debt is estimated to be 119 percent of the GDP. (Image: News18 Creative)
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Sri Lanka’s foreign exchange reserves saw a 70 percent drop in 2 years. As of March, Sri Lanka’s reserves were enough to only pay for about a month’s worth of imports. (Image: News18 Creative)
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Short supply of essential commodities such as fuel and medicines, skyrocketing food prices has led to rationing, adding to Lankan’s woes. All this has fueled protests against the Sri Lankan government. (Image: News18 Creative)
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Short supply of fuel means low electricity generation. Lankans are facing long power cuts, manufacturing and daily life has taken a hit. (Image: News18 Creative)
Sri Lanka’s economy has had structural problems for several years. Its national expenditure exceeded its national income, which means the country was borrowing more than it was producing. (Image: News18 Creative)
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Three churches and three luxury hotels in Sri Lanka were targeted in a series of coordinated terrorist suicide bombings in April 2019. The attacks led to a dip in international tourist, a major source of foreign exchange for the country. Later in November, after winning presidential election Gotabaya Rajapaksa announced substantial tax cuts. This step ended up lowering the government’s revenue and wiped out parts of Sri Lanka’s economy. (Image: News18 Creative)
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Before Sri Lanka could recover from repercussions of Easter bombings and tax cuts, the COVID-19 pandemic hit the world hard in 2020. (Image: News18 Creative)
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In April 2021, the Rajapaksa government, in an attempt to implement its poll promise of promoting organic farming, banned the import and use of chemical fertilisers and pesticides. The step proved catastrophically wrong. (Image: News18 Creative)
By March 2022, Sri Lanka was facing a critical lack of foreign currency. This means the country is unable to import essential goods including fuel, medicines, food items etc. (Image: News18 Creative)
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On April 2, a state of emergency was declared and the next day, a nationwide social media blackout was imposed. (Image: News18 Creative)
