Sri Lanka is witnessing an unprecedented financial disaster – there is no such thing as a diesel left within the nation, the authorities would not have funds to purchase petrol, tea is being bought at Rs 100/cup and individuals are on roads protesting towards their authorities.
In right this moment’s DNA, Zee Information Editor-in-Chief Sudhir Chaudhary analyses the components that led to financial disaster in Sri Lanka.
Sri Lanka acquired its independence within the 12 months 1948. The nation witnessed a large civil struggle between the Tamil and Sinhala communities between the 12 months 1983 to 2009. Nevertheless, Sri Lanka’s financial scenario improved within the publish civil struggle period. Within the 12 months 2019, the scenario reached to a degree the place World Financial institution declared Sri Lanka a “High Middle Income” nation. On this 12 months, Sri Lanka’s per capita earnings reached Rs 2.90 per 12 months, whereas India’s per capita earnings stood at Rs 1.57 Lakh per 12 months on the similar time.
Then what led to this sudden financial disaster?
There are three predominant causes for the Sri Lankan financial disaster:
1) Dependecy on debt for growth: The most important mistake that Sri Lankan authorities did over the previous few years was to make a humongous quantity of worldwide borrowings to satisfy its growth wants. In 2016, Sri Lanka had a mortgage of $46 Billion (Rs 3.45 lakh crores) on its head. Nevertheless, in six years, the identical quantity has grown up greater than twice – to Rs 6 Lakh crore – which is sort of equal to the scale of its whole financial system.
2) Not spending the debt into the proper route: The second mistake was to not spend the debt-money judiciously. Sri Lanka did not spend the cash on its manufacturing sectors that might have led to rising the incomes of individuals. Sri Lanka’s financial system depends on three sectors – tourism, tea and textiles. Nevertheless, all these three sectors have been badly affected in the course of the pandemic.
3) Dependency on import: Sri Lanka by no means tried to develop into self-dependent. The nation exports even the minor day-to-day merchandise. There are hardly any country-made merchandise obtainable in Sri Lanka which makes the financial system depending on imports.