Sri Lankan crisis
Sri Lankan economy heading towards grim situation figures present the picture more clearly- fiscal deficit exceeded10%in 2020-21while debt to GDP ratio rose from.94%in 2019to 119%in 2021. Gross foreign reserves dropped24%further in Jan 2022 to 2.3 us billion dollars.
Factors responsible for the present situation-
1)Historical imbalances
2)IMF loan-related conditions
3)policies of the govt
A situation that further plummeted the economy's recent backdrop
*Easter bomb blast of April 2019- leading to a drop in the number of tourists
*Gotabaya Rajapaksa in 2019 promised lower tax rates and wide-ranging sops for farmers
*Covid 19pandemic( tourism,remittances,export affected)
*Russia Ukraine war fuel prices escalated-fuel shortage-power plants shutting-power crisis-some power plants use hydro energy I.e. water - agriculture affected due to paucity of water diverted for the energy sector
*Ban on chemical fertilizers in order to make Sri Lanka organic farming nation affected agriculture production
*Depleted foreign reserves- downgraded Sri Lanka Sovereign rating by international rating agencies-impacted investor confidence.
WHY INDIA SHOULD HELP SRILANKA- to contain the string of pearls policy of China
MEASURES TAKEN TO ALLEVIATE CRISIS
1)Reduce import expenditure
2) Bilateral partners loan approached
3)credit currency swap
4)boost investors' confidence
KEYWORDS -
1) credit currency swap
2)fiscal deficit
3)Balance of payment
4) Twin deficit
5) debt to GDP ratio
