The Lankan Economic Crisis


The economic situation of Sri Lanka continues to deteriorate as Sri Lankans queue for hours at supermarkets, staring at empty compartments and unable to obtain necessities. The existence of pandemic has amalgamated with an intensified financial and economic crisis, posing a serious threat to Sri Lanka. The government should have established rigorous control measures in response to the crisis in Sri Lanka, but the mechanisms in place are insufficient and ineffective. The President proclaimed a state of emergency in the country in August, and the army was given complete authority to seize supplies, ration essentials, and ensure that the government's forex reserves were only spent for needed commodities. As an import-dependent economy, the depreciation of the rupee by 8% in 2021, combined with stockpiling of commodities, has pushed food prices into the double digits, with inflation at 6%.

The fall of the foreign reserves to $2.8bn at the end of July, from $7.5bn in November 2019 will add to the difficulty of repayment of outstanding payments on foreign debt (around $4bn). Even though the country is experiencing a forex reserve crisis, the Sri Lankan administration is unlikely to seek assistance from the IMF since it would "undermine the country's much-vaunted sovereignty" and jeopardize the backing of its supporters. To curb the outflow of foreign cash, Sri Lanka has already implemented import limits on motor vehicles, agricultural products, and consumer durables in the year 2020.

Despite efforts to stabilize financial support through foreign exchange swaps with China, South Korea, Bangladesh, and India to strengthen reserves and finance imports, the situation remains uncertain. Not to mention the fact that, as a result of several tax revisions and a loss of confidence, Sri Lanka's access to financial markets has been constrained since 2019. Food prices, the depreciation of the Sri Lankan rupee, and the accelerated depletion of foreign reserves have made it more difficult for citizens to subsist and accumulate food. Living conditions have been made even more difficult by the lack of sugar, milk powder, and other basic food staples.

But what exactly went wrong to bring the country to this point?

The pandemic has had a significant impact on Sri Lanka's tourism industry, which accounts for 10% of the country's GDP and acts as a source of foreign reserves.

The Organic Agricultural Reform, which was launched in early 2021, stated that Sri Lanka would become the first country to implement 100% organic agricultural farming and thereby prohibited the supply and use of chemical fertilizers. Because 90% of farmers utilize chemical fertilizers and other agrochemicals, this choice has had a significant impact on agricultural productivity, nearly halving it.

Given the current situation, one could assume that the government has relaxed its organic farming plan, but the administration is not ready to abandon its aggressive reform push. Tea and rubber exports have been severely harmed, causing imports to outpace exports. The Sri Lankan government thinks that short-term costs will be offset by long-term gains, although these "short-term losses" are difficult to bear.

Denying the food crisis, the government has blamed the scarcity of essentials on hoarding by traders, despite the fact that the country's reliance on imports and organic farming has resulted in a shortage of supplies and increasing prices.

Sri Lanka's government is currently battling to combine consumer demand with diminishing foreign exchange reserves, while the country's full-year GDP decreased 3.6% in 2021. Adopting an export-oriented model, encouraging private investment, and establishment of credibility in the economy can turn out to be the saviors. Although the government stated that it will provide organic fertilizers, the ban on chemical fertilizers should be lifted, and gradual approaches towards organic farming should remain intact. This will aid in the administration of surging inflation and skyrocketing prices, as well as preventing the economy from degrading further.

Ishika Sharma
B.A (Hons) Economics
Third Year







 

Comments

Post a Comment

Popular posts from this blog

Is Artificial Intelligence Gender Blind?

Image
What is the first thing that strikes your mind when you hear of the term artificial intelligence? Artificial Intelligence is the   future of the world. A hot brewing topic of discussion among the Genz these days. In simpler words, AI is the science of making intelligent machines and computer programs. It works primarily to eliminate human error and maintain ethical work by eliminating all prejudices. But are we really achieving this? Well, you will be astonished to know that according to the World Economic Forum (2018), women make up an estimated 22% of employees in   AI positions worldwide . At the same time, and closely related to these issues, there are large gender differences and other biases in the data used to train AI and machine learning systems. This is not only a question of women's careers, but also of technological development and its impact on society. Siri, Alexa, Cortana, Google Assistant . What do these voice assistants have in common? The answer is they'r...
Read more

Women Comics- Participation, Portrayal and Reception

Image
In recent years, India’s Stand-up Comedy has caught up with the millennials and has achieved a lot of popularity among them. It has registered itself as yet another open arena for the youth to experiment and explore. Although it’s out in the open that male dominance is prevalent at the roots of Indian society, stand-up comedy is no exception.  Women participate in stand-up comedy at a much lower rate than males, as they do in many other aspects of Indian culture.  "While the number of women comics in India can be counted on the fingers of one hand, the bro-code in the industry keeps even these women, who survive hugely on self-deprecating humor, on the fringes. Moreover, the overall stand-up humor relies heavily on wife and girlfriend jokes."- The Indian Express (2017)  In the case of stand-up comedy in India, women are considered inferior to men and hence are subjected to more judgment by the audiences. The stereotypical image of women in the minds of Indian audiences do...
Read more

Revamping Businesses Through Tech Lenses

Image
We live in a world of technological advancements and there is no doubt that these advancements have made our lives not only easier but have also improved the quality of living. While one may think that these technological breakthroughs are limited to individuals only, but in reality, they have also made a beneficial impact on the way businesses operate.  In the past, businesses had to rely on paper records and manual processes to track employee's attendance and performance. This was not only time-consuming, but was also prone to errors. Today, with technology, businesses can automate these processes and make it easier for the HR department to do their job. Technology has driven a lot of advanced processes in many businesses. It has revolutionized business as we know it and various companies belonging to numerous industries are looking to harness it to improve their workforce, build brand recognition and bolster the bottom line. To put more light on the topic, let's take a loo...
Read more