Exposition:
Sri Lanka acquired its independence in 1948 from the jaws of British colonizers. It is an island that lies in the Indian Ocean in South Asia. At he time of its birth, it was called Ceylon. It attained the status of Republic in 1972. Ceylon has had engaged with different international groups: it is a founding member of the South Asian Association for Regional Cooperation, a staunch member of United Nations, and a member of the Commonwealth Nations. It holds the record of highest ranking of Human Development Index among the South Asian countries.
A Glimpse on the Economy of Ceylon:
According to a report, published on The Observer, Sri Lanka has the second highest GDP per capita income out of all the countries of South Asia. It remained an avid plantation economy in the 19th and 20th century. It is famous for its exportation of cinnamon, rubber, and its famous tea. The development of modern-conduct ports by the British rule contributed to the betterment of the economy of Sri Lanka as it enabled them to trade in a swift manner with neighboring countries and rest of the World. Sri Lanka remained under the influence of Socialism from 1948 to 1977, and this influence led to many changes that proved fruitful for Sri Lankan finance and economy:
The nationalization of industries, a free market introduced in 1977 that promoted privatization of enterprise, and a rapid industrialization of different sectors. According to the report of World Bank in 2020, GDP per capita of Sri Lanka stood at 3682 USD which is an enviable amount for most of the countries of South Asia. From 2016 to 2017, Sri Lanka
saw a 4.9% increase in its GDP per capita income. You might be wondering that what calamity hit Sri Lanka leading to such an averse and disastrous situation of economy? Well, let us have look at some of the factors that led to Sri Lanka’s backbreaking crisis.
COVID–19 Pandemic:
A villain to almost all of the countries of the world, COVID dealt a huge damage to the economy of Sri Lanka. It sprouted in 2019 from Wuhan, China and took the world by the storm. At first, it was not serious but by the passage of time, it spread rapidly leading to closure of borders of countries. Every South Asian country was affected, Sri Lanka was no exception. Sri Lanka generated its 10% of the income from Tourism sector, with COVID at its peak late 2019 and early 2020, Tourism was shut down and Sri Lanka suffered a great chunk of its income.
Waiving Taxes:
Gotabaya Rajapaksa, the Sri Lankan President, was running an election campaign. It was a short time before COVID–19. In a populist move, Rajapaksa’s government waived off a great amount of taxes on different commodities. At surface level the people of Sri Lanka became happy but this happiness did not last long as country fell into the abyss of economic crisis. The balance of Imports and Exports was disturbed because of removal of certain taxes.
Loans from IMF:
It is evident that Sri Lanka depends on the loans from International Monetary Fund (IMF) heavily. Sri Lanka has taken 16 loans from IMF since 1965. These loans result in depreciation of currency of Sri Lanka as per IMF’s policies. This depreciation led to limited remittance in Sri Lanka deteriorating the economy further.
Bombings in 2019:
In April 2019, there were series of suicide attacks and bombs that shattered the Sri Lankan economy as tourists feared to step in the country. Churches and hotels of Colombo were targeted in incessant events of Terrorism.
Conclusion
In 2019, Asian Development Bank (ADB) issued a statement in which Sri Lanka was called “A classic twin deficit economy” which means the national expenditure of Sri Lanka exceeds the national income. The crisis of Sri Lanka are not only the result of natural disasters like COVID, but also a ceaseless exploitation of sources and resources by different governments had a great hand to such sabotage. Populist tactics by the current President and its government contributed a great deal.
