Staring at economic meltdown, Sri Lanka’s financial woes in recent times have swelled many fold, which may now snowball into a financial as well as humanitarian crisis with fears that the country could go bankrupt in 2022.
The current inflation in the country is at record high levels with soaring food prices and government coffers going dry. The meltdown faced by the Lankan government is in part caused by the immediate impact of the Covid crisis and the loss of tourism but is compounded by high government spending and tax cuts eroding state revenues, vast debt repayments to China and foreign exchange reserves at their lowest levels in a decade, the report said.
Inflation has meanwhile been spurred by the government printing money to pay off domestic loans and foreign bonds. The World Bank estimates 500,000 people have fallen below the poverty line since the beginning of the pandemic, the equivalent of five years’ progress in fighting poverty.
Inflation hit a record high of 11.1 per cent in November and escalating prices have left those who were previously well off struggling to feed their families, while basic goods are now unaffordable for many.
After the Rajapaksa led Sri Lankan government declared an economic emergency, the military was given power to ensure essential items, including rice and sugar, were sold at set government prices. The move is yet to yield any positive results.