Debts, Covid & Bad Policies – What Caused Sri Lanka's Economic Crisis

Why is the country facing a critical shortfall of foreign currency?

With severe shortage of food, cooking gas, and other essential items, sky-rocketing fuel prices and record-high inflation, Sri Lanka is battling its worst economic crisis in over several decades.

(Photo: Altered by The Quint)

With severe shortage of food, cooking gas, and other essential items, sky-rocketing fuel prices and record-high inflation, Sri Lanka is battling its worst economic crisis in over several decades.

A critical shortfall of foreign currency had led to a massive reduction in imports of essential items.

This nightmarish situation has crippled the lives of common citizens who have been waiting in long queues across the country for groceries and fuel. At least two elderly men reportedly died in different parts of the country waiting for petrol and kerosene oil.

As anger against the government grows, troops have been deployed outside state-run petrol pumps to thwart protests that have been breaking out sporadically.

The economic meltdown has also affected millions of students, with the country cancelling school exams after running out of printing paper. Amid dwindling fuel supplies, there have also been long spells of power outage for several weeks now, with some blackouts lasting for as long as seven hours.

Unable to eke out a living at home, some citizens are even resorting to flee to India. So far, a total of 16 Sri Lankan refugees from Jaffna and Mannar arrived at Tamil Nadu in a boat, on 22 March in hopes of restarting their lives.

But what are the various factors that led to such an unprecedented scale of economic crisis in the first place? How did the country fall into this vortex of debts? What is Sri Lanka doing to stave off this crisis? As India extends $1-billion line of credit as assistance to the cash-strapped nation, will this move help India geopolitically?

Our two guests for this episode are Saptarshi Basak, writer, International News Desk at The Quint and Sathiya Moorthy, head of Observer Research Foundation’s Chennai Initiative. Moorthy has also been the editorial advisor at a trilingual TV group in Sri Lanka.