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Sri Lanka’s Economic Crisis Explained: Sri Lankan Refugees Flee To India As The Country Faces Economic Recession: 10 Points

Sri Lanka’s financial crisis stemmed from a critical shortage of foreign currency.

New Delhi:
As Sri Lanka faces its worst economic crisis, with power outages and shortages of essential goods leading to massive protests, its people have begun seeking refuge in India.

Here is your 10 point cheat sheet for this great story:

  1. The Indian Coast Guard on Tuesday detained six Sri Lankans including three children, all residents of Jaffna and Kokupadaiyan in the northern province of the island nation, who were reportedly fleeing unemployment and food shortages. They were rescued from an island near Rameshwaram in Tamil Nadu.

  2. Sri Lanka ordered troops to petrol stations on Tuesday as sporadic protests erupted among thousands of drivers queuing daily for fuel shortages, the AFP news agency reported.

  3. Three dead seniors have been waiting in line to get fuel since Saturday, police said. Petroleum prices have soared amid the country’s foreign exchange crisis, causing inflation and significant supply shortages.

  4. In a move that will adversely affect students, the island nation has canceled all exams forever due to severe paper shortages.

  5. Sri Lanka’s financial crisis stemmed from a critical shortage of foreign currency, leaving traders unable to finance imports. The country’s tourism sector, a major source of foreign exchange, dried up during the Covid pandemic and recklessly borrowing from China to finance infrastructure projects have caused its debt to rise.

  6. The 2019 series of bomb blasts across Colombo during Easter have hit the country’s tourism sector badly, directly affecting the economy and forex reserves. Pandemics only exacerbate the crisis.

  7. Experts said the country’s high dependence on imports for its essential goods was also a source of crisis as it depended almost entirely on imports for its daily needs such as sugar, legumes, grains and pharmaceuticals. The lack of foreign currency to pay import bills also led to food shortages, they said.

  8. China has refused to help Sri Lanka which is appealing to reschedule China’s huge debt burden in the face of the COVID-19 outbreak that has affected the tourism sector, the Hong Kong post reported.

  9. On March 17, India announced a USD 1 billion credit grant to Sri Lanka for the procurement of food, medicines and other necessities during a two-day visit by Sri Lankan Finance Minister Basil Rajapaksha to India. Last month, India extended a USD 500 million line of credit to Sri Lanka to help it buy petroleum products.

  10. President Gotabaya Rajapaksa has said that Sri Lanka will seek an International Monetary Fund bailout to combat the crisis. He said last week that IMF assistance was needed to find a “new method” to repay external debt and government bonds this year with about $ 6.9 billion needed this year to pay off debt, the AFP news agency reported.

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