Yesterday, the island nation located in the Indian Ocean was Sri Lanka Officially declared insolvency with 51 billion USD of foreign debt.
In fact, experts say that the crisis in Sri Lanka has formed many years ago, mainly due to the ability to manage the economy poorly. The country has borrowed heavily from foreign creditors to provide domestic public services, but has not attempted to be as self-sufficient as an export-driven economy. According to The Guardian, China accounts for about 10% of Sri Lanka’s $35 billion in foreign debt, as of April 2021. This figure is thought to be much higher if the debt of state-owned companies and central banks is included.
Last month, inflation in Sri Lanka hit 18.3% – double the rate in the US. Prices of all essential products skyrocketed.
Anurudda Paranagama, a driver in the capital Colombo, said that in order to pay for the rising food costs and cover his car loan, he had to take on a second job, but it was still not enough. “It is very difficult for me to pay the debt. Just paying for electricity, water and food, I have a clean pocket.” It is known that his family now eats two meals a day instead of three.
The driver further shared that a grocer in his village opened 1kg packages of powdered milk and divided it into 100g packs because customers couldn’t afford the whole package. “We now buy 100g of beans instead of buying 1kg for a week like before,” said Paranagama.
ABC News quoted Mr. I Karunasinghe – a lottery ticket seller in Sri Lanka as saying: “During working hours, each time going to the toilet will cost 20 Sri Landa rupees (about 1.4 thousand VND). I was born 5 times, the cost of this basic need is too expensive. I am not satisfied with my income at all. High inflation makes my spending exceed the allowable limit.
In March, even Sri Lanka said that the semester exams of millions of students were indefinitely postponed because of a lack of imported printing paper.
“Schools are unable to hold exams because they cannot secure foreign exchange to import the necessary paper and ink,” the Education Department of Sri Lanka’s Western Province said today. Official sources say about two-thirds of the country’s 4.5 million students will have to postpone their semester exams.
On CNN, a woman in Colombo said she was waiting to buy gas to cook rice for the whole family. Others lamented the double price of bread. Meanwhile, taxi drivers say that restricting gasoline sales makes it difficult for them to make a living.
Some find themselves in a dilemma, having to work to support their families, but also have to wait in line to buy necessities. Even middle-class people with savings are angry about running out of drugs or gas. The capital Colombo has frequent power cuts, sometimes up to 10 hours a day.
Currently, Sri Lanka is still seeking financial support from the IMF and other major countries. In a speech last month, President Rajapaksa said he had weighed the pros and cons of working with the IMF and had decided to pursue its bailout. This is what his previous government hesitated to do. Sri Lanka’s Finance Ministry today explained the default declaration was to ensure “fair and equal treatment of all creditors” before the IMF provided assistance to the country.
Sri Lanka also sought help from China and India. New Delhi agreed to a $1 billion credit package last month. However, analysts warn this support will only prolong the crisis, not be resolved.
“To get out of the crisis, the first priority is to quickly form an effective government. Reaching an agreement with the IMF will be the accounting step,” said economists Ankur Shukla and Abhishek Gupta.
Source: CNN, The Guardian
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