Sri Lanka - Update on their economic crisis

The Sri Lankan central bank has set out how the debt crisis has adversely affected the economy and the trajectory of the recovery, forecasting a 2% decrease in growth this year before 3.35 growth in 2024. They also highlight the fact that real incomes have been significantly reduced, with economy shrinking by nearly 8% last year and inflation peaking at 70%. However, compared to the IMF forecast, this look optimistic.

Equally, the problem hasn't entirely gone away: according to the article "Sri Lanka owes about $7bn (£5.7bn) to China and around $1bn to India" although these debts have been restructured and the IMF and World Bank have provided emergency funds worth around $3.6bn.

Sri Lanka is facing its worst economic crisis since independence in 1948, with severe shortages of food, fuel and medicine. The crisis has been caused by a number of factors, including:

• Austerity measures: The Sri Lankan government has been implementing austerity measures in recent years in an effort to reduce the country's budget deficit. These measures have included cuts to public spending and tax increases.
• COVID-19 pandemic: The COVID-19 pandemic has had a devastating impact on Sri Lanka's economy. The pandemic has led to a sharp decline in tourism, which is a major source of foreign exchange for the country.
• Falling commodity prices: The prices of Sri Lanka's main exports, such as tea and rubber, have fallen in recent years. This has reduced the amount of foreign exchange that the country earns.
• High debt levels: Sri Lanka has a high level of foreign debt. This debt has made it difficult for the country to borrow money from international lenders.
• Political instability: Sri Lanka has been rocked by political instability in recent years. This has made it difficult for the government to implement effective economic policies.

The economic crisis has had a devastating impact on Sri Lankans. Many people are struggling to afford food, fuel and medicine. The crisis has also led to a sharp increase in poverty and unemployment.