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Is Sri Lanka on the point of bankruptcy?

Graham Watson

3rd January 2022

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This Guardian article looks at how the pandemic has had a severe impact upon the Sri Lankan economy.

At least half a million people having slipped into poverty and rising food prices threatening to add to this.

In addition, it seems that the government have made some odd policy choices - banning the use of fertiliser, for example - which have compounded the country's problems.

Additionally, the collapse of tourism has had a significant adverse impact; factor in high levels of debt, not least to China, and a lack of foreign exchange reserves and many people are predicting both a humanitarian and a financial crisis in this small developing economy.

Sri Lanka has $7.5bn of foreign debt (China's share is $5bn) and Forex Reserves of only $1.5bn - with inflation near 12%.

"It owes China more than $5bn in debt and last year took an additional $1bn loan from Beijing to help with its acute financial crisis, which is being paid in instalments.”

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Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.