SRI LANKA ON THE BRINK OF BANKRUPTCY?

Sri Lanka is facing a deepening monetary and humanitarian crisis that might lead it to bankruptcy in 2022 as inflation rises to record levels.

According to World Bank estimates, five lakh people in Sri Lanka have fallen below the poverty line since the pandemic struck, which is described as a “huge setback equivalent to five years’ worth of progress”.

The meltdown Janus-faced by the govt, junction rectifier by the strongman president Gotabaya Rajapaksa, is partially caused by the immediate impact of the Covid-19 crisis and also the loss of business however is combined by high government payment and tax cuts geologic process state revenues, huge debt repayments to China and interchange reserves at their lowest levels during a decade.

The World Bank estimates 5000 people have fallen below their personal income since the start of the pandemic, the equivalent of 5 years’ progress in fighting financial conditions.

Inflation hit a record high of 11.1 per cent in November and escalating costs have left those that were antecedently prosperous troubled to feed their families, whereas basic products are currently unaffordable for several.

The loss of jobs and important foreign revenue from business, which sometimes contributes quite ten per cent of gross domestic product, has been substantial, with quite 2000 people losing their livelihoods within the travel and business sectors, consistent with the globe Travel and business Council.

One of the foremost pressing issues for the country is its large foreign debt burden, specially to China. It owes China quite $5bn in debt and last year took a further $1bn loan from national capital to assist with its acute monetary crisis

In the next twelve months, within the government and personal sector, the country is needed to repay associate degree calculable $7.3bn in domestic and foreign loans, together with a $500m international sovereign bond compensation in January.

The Gotabaya Rajapaksa government has identified eight sectors together with energy, refineries, electricity grid, ports, realty, tourism, and ICT for attracting India's investments and footprints within the island nation

In January, Republic of India confirmed a $400 million currency swap with country whereas deferring another $500 million due for settlement to the Asian Clearing Union (ACU), move aimed toward serving the island nation witnessing an unexampled slump.

India is aiding Srilanka for emergency monetary help, together with Lines of Credit for mercantilism necessities and a currency swap to spice up Sri Lanka’s exhausting foreign reserves.

With this credit line, country can purchase fossil fuel product because the island nation struggles with a colossal fuel and energy crisis

India had recently provided $900 mn forex support; it's poised to increase $1 bn credit for food, medication imports.