Sri Lanka’s Worst Economic Crisis

Sri Lanka, being a not-so-small island nation, has to depend on imports from various other countries for various essential commodities. But despite heavy imports, and some occasional instances of financial crisis, Sri Lanka managed to hold out its economy amid civil wars, natural disasters, and Government collapse. However, without a signal, the country has now plunged into a severe economic crisis, the worst till date, bringing the country’s economy on the verge of collapse.

Sri Lanka, the land of cinnamon and tea, is known for the export of tea and spices, and is also a major hub of tourism in Asia. The geography of Sri Lanka promotes fertile, flat lands towards the north, hilly interior, supports a great fishing industry, and has major ports between the west and the east. Nevertheless, Sri Lanka lacked big industrial regions like other developed nations, and that is why foreign debt is always a mounting pressure in the Sri Lankan economy. It’s 100% dependence on fuel oil from other countries has marked a severe fuel shortage in the country.

Covid-19 has a major role to play in crippling the Sri Lankan economy. Though the island never experienced huge surges of Covid-19 victims, its mainstay, the tourism industry suffered a huge setback, when the whole world went into lockdown. Though many African and South American countries opened up their doors to foreigners as the pandemic subsided, Sri Lanka remained virtually cut off from the tourism sector till date. Repeated lockdowns in the country, followed by economic crisis put both foreign and domestic tourists out of reach of famous tourist destinations in Sri Lanka.

Adding fuel to the fire were some Government policies that were taken hastily with little planning for the future. Some of them, like reduced taxation, and organic farming backfired as they were implemented overnight, without any backup plans. While the measures were really good, sudden change in taxation drained the Government Treasury, and replacing conventional farming with organic farming resulted in less productivity of crops. Sri Lanka’s reliance on China on port building has also backfired as its Hambantota port has been a commercial failure, prompting Chinese companies to take up the port business.

Till date, India has given almost 2 billion financial aid to Sri Lanka. India has donated essential items like rice and fuel to Sri Lanka so that common people may get themselves out of the crisis. More countries, including China, have come forward, and helped Sri Lanka regain their lost ground. However, the future of Sri Lanka is not looking bright with the whole Parliamentary cabinet except the President and the Prime Minister resigned.

Written by – Himadri Paul

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