{"id":196227,"date":"2022-07-19T09:12:13","date_gmt":"2022-07-19T03:42:13","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=196227"},"modified":"2022-09-27T14:50:08","modified_gmt":"2022-09-27T09:20:08","slug":"answered-what-led-to-the-economic-crisis-in-sri-lanka-highlight-the-lessons-that-can-be-taken-from-this-crisis","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/answered-what-led-to-the-economic-crisis-in-sri-lanka-highlight-the-lessons-that-can-be-taken-from-this-crisis\/","title":{"rendered":"[Answered] What led to the economic crisis in Sri Lanka? Highlight the lessons that can be taken from this crisis.\u202f\u202f"},"content":{"rendered":"<table>\n<tbody>\n<tr>\n<td width=\"616\"><strong>Introduction:\u00a0<\/strong>Contextual introduction.<br \/>\n<strong>Body:\u00a0<\/strong>Write some reasons which led to the economic crisis in Sri Lanka.\u00a0\u00a0Also, write some lessons that can be learnt from this crisis.<br \/>\n<strong>Conclusion<\/strong>: Write a way forward.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The\u00a0<strong>Sri Lankan economic crisis<\/strong>\u00a0is an ongoing crisis in the island-state of Sri Lanka\u00a0that started in 2019.\u00a0It is the country&#8217;s worst economic crisis since its independence\u00a0in 1948.\u00a0It has led to unprecedented levels of inflation, near-depletion of\u00a0foreign exchange reserve<strong>, <\/strong>shortages of medical supplies, and an increase in prices of basic commodities.<\/p>\n<p><strong>Reasons behind the economic crisis in Sri Lanka<\/strong><\/p>\n<ul>\n<li><strong>Twin deficit:\u00a0<\/strong>Sri Lanka is facing a budget shortfall alongside a current account deficit<strong>.\u00a0<\/strong>The country\u2019s national expenditure exceeds its national income<strong>.\u00a0<\/strong>Capital-intensive projects (e.g., Hambantota port) did not deliver the expected returns.<\/li>\n<li>BOP crisis led to the <strong>devaluation of Sri Lankan currency<\/strong> hitting payments for essential items and debt servicing.<\/li>\n<li><strong>Decline in foreign exchange reserve:<\/strong>It gave rise to high uncertainty among people regarding the nation\u2019s economic stability in the coming time.<\/li>\n<li><strong>Spiralling debt<\/strong>: Sri Lanka has borrowed repeatedly since 2007 leading to $11.8 billion worth of piled-up debt which makes up 36.4% of its external debt.<\/li>\n<li><strong>Difficulty in getting international credit:<\/strong>Many rating agencies downgraded Sri Lanka\u2019s sovereign ratings to the junk category citing rising repayment pressures and \u201cuneven access\u201d to financing as reasons.<\/li>\n<li><strong>Decline of Tourism Industry<\/strong>: due to Easter bombings in 2019 and the Covid pandemic.<\/li>\n<li>The <strong>spike in oil prices<\/strong> on an economy totally dependent on imported oil has also affected the economy.<\/li>\n<\/ul>\n<p><strong>Lessons that can be taken from this crisis<\/strong><\/p>\n<ul>\n<li>Most oil-importing emerging countries need to worry about their ability to fund increasing import bills constantly.<\/li>\n<li>It would be best to <strong>raise<\/strong> <strong>domestic tax revenue and shrink government expenditure<\/strong> to limit borrowing, particularly sovereign borrowing from external sources.<\/li>\n<li>There is a need for ambitious <strong>fiscal consolidation<\/strong> based on high-quality revenue measures, raising income tax.<\/li>\n<li>The country\u2019s <strong>heavy dependence on imports<\/strong> for essential goods should be reduced like sugar, pharmaceuticals, fuel, pulses and cereals worsened the crisis.<\/li>\n<\/ul>\n<p>Economic crisis in Sri Lanka is a reminder to other countries to constantly introspect their economic policies at regular intervals. It provides a lesson to every nation regarding the adverse consequences that can arise due to ill-timed and irrational policy decisions.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction:\u00a0Contextual introduction. Body:\u00a0Write some reasons which led to the economic crisis in Sri Lanka.\u00a0\u00a0Also, write some lessons that can be learnt from this crisis. Conclusion: Write a way forward. The\u00a0Sri Lankan economic crisis\u00a0is an ongoing crisis in the island-state of Sri Lanka\u00a0that started in 2019.\u00a0It is the country&#8217;s worst economic crisis since its independence\u00a0in 1948.\u00a0It&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/answered-what-led-to-the-economic-crisis-in-sri-lanka-highlight-the-lessons-that-can-be-taken-from-this-crisis\/\">Continue reading <span class=\"screen-reader-text\">[Answered] What led to the economic crisis in Sri Lanka? Highlight the lessons that can be taken from this crisis.\u202f\u202f<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[9],"tags":[11068],"class_list":["post-196227","post","type-post","status-publish","format-standard","hentry","category-public","tag-sri-lanka-crisis","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1703435081},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/196227","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=196227"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/196227\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=196227"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=196227"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=196227"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}