Sri Lanka is facing its worst economic crisis since its independence but just how did the situation get this bad. There has been economic mismanagement by successive governments which created a twin deficit which indicates its national expenditure exceeds its national income and the country does not produce enough tradable goods and services. The situation got even worse due to a range of factors.
- In November 2019 - Goethe Rajapaksa announced sweeping tax cuts before the parliamentary election in a few months and
- In April 2021 - There was the government's push for organic farming (by banning all kinds of fertilizers) which hit the farm output.
On top of all this, the pandemic severely hit the other sources of income like the tourism sector (which the country used to strongly depend on) and the foreign workers remittances. The credit rating agencies had downgraded Sri Lanka, locking it out of the international capital markets on which it relied to pay its debt obligations. As the result, it started using its foreign reserves for that which meant there wasn't enough foreign currency to pay for the essential imports which resulted in the shortages on the ground.
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