In the News

Is Sri Lanka on the point of bankruptcy?

Graham Watson

3rd January 2022

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.”

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.

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