Sri Lanka on the brink of bankruptcy with record high inflation and soaring receivables
Abstract
Sri Lanka on the brink of bankruptcy: Sri Lanka is sinking into the abyss of a deepening financial and humanitarian crisis. And the country’s coffers are drying up due to the record level of inflation and the troubles caused by Corona. According to one report, the situation has become so bad that this country is likely to go bankrupt this year.
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Sri Lanka is sinking into the abyss of a deepening financial and humanitarian crisis. The country’s coffers are drying up due to record levels of inflation, the boom in food prices and the problems caused by the Corona pandemic. The situation has become so bad that this country is likely to go bankrupt this year. A report said the country needs to repay an estimated $7.3 billion in domestic and foreign debt over the next 12 months.
Foreign exchange reserves at the lowest level
Domestic and foreign debt includes $500 million in international sovereign bond payments due in January. If we talk about the country’s foreign exchange reserves, then until November it was only 1.6 billion dollars, which is the lowest level ever. According to the report, the boom in money printing to pay off domestic debt and foreign bonds pushed inflation to a record low of 12.1 percent in December from 9.9 percent a month earlier. Monthly inflation as measured by the CPI in Colombo was driven by monthly increases in the prices of both food and non-food items.
Food inflation rate reached 22.1 percent
According to the announcement by the country’s central bank, food price inflation in December rose to 22.1 percent from 17.5 percent a month ago. Apart from that, the country’s tourism sector has been severely affected by the Corona crisis. At the same time, increased government spending and tax cuts aggravated the situation. At the same time, Sri Lanka’s back was broken while repaying China’s debts. These major problems have increased the risks of an economic slowdown in the country for President Gotabaya Rajapaksa. In other words, Sri Lanka is on the verge of bankruptcy due to the debt trap.
5 lakh people from the country are trapped in poverty
According to World Bank estimates, 500,000 people have fallen into poverty in the country since the start of the pandemic. According to the report, even families who were considered wealthy earlier find it difficult to collect bread for June 2. Most families in the country have to meet their basic needs. In the midst of the economic emergency in the country, more than two people have been employed in the travel and tourism sector itself and the situation remains the same in other sectors.
