After President flees, Sri Lanka is in crisis

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After collecting the Liquefied Petroleum Gas (LPG) cylinder at the distribution point in Colombo on July 12, a man carries it. (Arun Sankar/AFP/Getty Images)

Sri Lanka is an island nation with 22 million inhabitants. worst financial crisisSince 1948, when it was granted independence.

Crippling inflation is driving the price of basic goods up. The country’s foreign currency reserves have fallen to an all-time low, and dollars are running out to pay essential imports like food, fuel, and medicine.

Ministers from the government have resigned in large numbers and Sri Lankans took to the streets to protest the fact that the crisis has made their lives miserable. They are forced to wait in line for basic goods while others are being rationed.

Despite earlier attempts by the government, such as the introduction of a Week of four days, then-Prime Minister Wickremesinghe declared the country “Bankrupt” last Tuesday.

Many people in major cities, including Colombo, continue to wait in long lines for food and medicine. There are reports of civil war between civilians and police as they wait.
Kanchana Wijesekera, Energy Minister, stated that the country still had less fuel than one day.
The frequency of trains has decreased, causing travelers to squeeze into their compartments or even to sit on top of them while they commute to work.
Due to fuel shortages, patients are not able to travel to hospitals. Food prices are also rising. Rice, which is a staple food in South Asia, has been removed from many supermarket shelves.

How did we get to this point? Experts say the crisis was years in the making. They point out a series government decisions that added to external shocks.

Murtaza Jafferjee of Advocata Institute, a Colombo-based thinktank, stated that Sri Lanka’s government has borrowed huge sums of money over the past decade in order to fund its public services.

This borrowing spree has coincided with a series of hammer blows to the Sri Lankan economy, from both natural disasters — such as heavy monsoons — to man-made catastrophes, including a government ban on chemical fertilizers that decimated farmers’ harvests.

In an attempt to stimulate the economy, President Gotabaya Rajapaksa cut taxes to address a huge deficit.

The move ended up costing the government revenue. Rating agencies downgraded Sri Lanka to default-level levels, resulting in Sri Lanka losing access to international markets.

Sri Lanka had to rely on its foreign currency reserves to pay its government debt. This led to its reserves shrinking. This resulted from increased prices and decreased imports.

Topping all that, the government in March floated the Sri Lankan rupee — meaning its price was determined based on the demand and supply of foreign exchange markets.

The plummeting rupee against the US Dollar only made matters worse for ordinary Sri Lankans.

On March 31, anger and public frustration erupted when protestors hurled bricks at the President and set fires. Protests heated up Saturday when people hurled bricks and started fires outside the President’s private residence. Stormed the houseHis resignation was demanded by the public. According to the latest developments, President Rajapaksa fled for Maldives where he was met by Prime Minister Wickremesinghe who was elected acting president. At the moment, protests continue in Sri Lanka and there is uncertainty about who will take charge and how this chaos will end.

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