Sri Lanka’s recent collapse begs a few questions. Perhaps we ought to understand that when a country fails to repay its debt, it does not declare bankruptcy, instead it defaults on loans. And one should remember that the “defaulter is the government, not the country”
If we take a quick look back, one can remember that Sri Lanka’s economy began to deteriorate in late 2020. At the time, the authorities pinned the reason on the raging Covid-19 pandemic. However, one expert believed, it was primarily due to political incompetence and mounting debts with China.
Fast forward to 19 May 2022. Sri Lanka defaulted on its debt for the first time in its history as the country struggled with its worst financial crisis in more than 70 years. And since then, its foreign currency reserves have depleted
Because foreign exchange reserves are depleted, the prices of daily essentials, especially food, are set to skyrocket in the market. Due to inefficiency and electricity shortages, the economy’s gears are grinding to a halt. Sri Lanka has reached the brink of a huge humanitarian calamity as a result of the financial crisis.
