SRI LANKA DEBT CRISIS

SRI LANKA DEBT CRISIS

TOPIC: IR

Context- A group of senior parliamentarians in Sri Lanka, including some aligned to the government, have called for an “orderly negotiated postponement” of outstanding foreign debt, and corrective policy measures including a “strong social welfare scheme”, to combat the island nation’s economic crisis.

Concept-

Sri Lanka Economic Crisis:

• Sri Lanka’s economic situation steadily deteriorated since the COVID-19 pandemic struck, with its key foreign revenue earning sectors – exports, tourism, and worker remittances – badly hit.
• The import-reliant country is facing a severe dollar crunch for months, fanning fears of a sovereign default and a severe food shortage for citizens.
• Sri Lanka’s gross foreign reserves dropped in January 2022, down by 24% since December.
• Sri Lanka has sought Indian assistance of over $2 billion.
• Sri Lanka’s current economic crisis is marked not only by draining foreign reserves, but also by increasing instances frequent food shortages and costs of essentials and food.