The Russia-Ukraine Crisis has increased the difficulty of Sri Lanka. The economy of Sri Lanka, with a population of about 22 million, was already in trouble. The Ukraine Crisis has exacerbated it. The people of Sri Lanka are in trouble. There is power cut for 6 to 7 hours daily. There is a long line of people at the gas station. They are finding it difficult to buy everyday things.
Inflation reached 15%
Sri Lanka’s economy has been hit hardest by rising crude prices and declining revenues from tourism. Inflation there has reached 15 percent, which is the highest in Asia. Sri Lanka’s foreign exchange reserves have come down to just $2 billion. The challenge before the government is to repay the foreign debt of $ 7 billion this year. The condition of the economy is deteriorating day by day.
Sri Lanka imports most things
Gas prices have risen nearly 50 per cent this month. People are suffering a lot due to lack of fuel. Sri Lanka is forced to import many things it needs. He imports everything from medicine to oil. The share of petroleum products in its total imports was 20 per cent in December last year. The economy has been hurt by crude prices rising by 88 per cent compared to a year ago.
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Increased problem due to reduction in revenue from tourism
Tourism plays a major role in the economy of Sri Lanka. This country, with an economy of $ 81 billion, earns $ 3.6 billion from tourism. About 30 percent of tourists to this country come from Russia, Ukraine, Poland and Belarus. The Corona epidemic had a great impact on tourism. Now due to the war of Russia-Ukraine, the income from tourism has decreased a lot.
$32 billion debt on the country
Sri Lanka has an external debt of about $ 32 billion. In this way, the government of Sri Lanka faces a double challenge. On the one hand, he has to pay the foreign debt and on the other hand he has to rescue his people with difficulty. The government is left with no option but to seek financial help from the International Monetary Fund (IMF). Citigroup has said in its report that the Sri Lankan government will have to restructure the foreign debt by July. The reason for this is that the government does not have the money to repay the debt of $1 billion in July.
Central bank advised to stop import of 300 things
The Central Bank of Sri Lanka has reduced the value of its currency to deal with the situation. It has also increased the interest rate on the loan. Central Bank Governor Ajit Nivard Cabral has advised the government to ban the import of about 300 non-essential items. These include from electronic appliances to apples. It has also asked the government to increase fuel prices and make electricity costlier.
There is no other way but to seek help from the IMF
Sri Lanka had sought health from India and China to save its economy from sinking. He was shying away from taking financial aid from the IMF. It was in talks with India and China for a credit line. But the talks have not progressed due to the Ukraine Crisis.
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