Financial Insights

Sri Lanka economic crisis deepens as riots erupt in the island nation

Sri Lanka is in the worst economic crisis in its history where inflation rates are soaring, there is no fuel left to use in the country and power cuts exceeding 7 hours are a daily occurence.

India has recently allowed a line of credit worth $1 billion to it’s island neighbour to ensure purchase of essential items. Sri Lanka is in heavy debt from several nations. China has is currently the largest creditor of Sri Lanka.

Almost 55% of Sri Lanka’s debt is from China. India is trying to free Sri Lanka from its 2 year long economic crisis and Chinese grasp as having China surround it is obviously rattling it. Currently China and India are locked in a tussle at the Himalayan border.

The people in the country are suffering as power cuts have begun reaching 13 hours a day. Lack of fuel, power, food and medicines have made public anger reach its peak as protests have begun throughout the nation.

There was a violent protest in front of President Rajapaksa’s office where the police had to use tear gas and water cannons to disperse the “extremist elements”. A large number of people have been detained as the protest died down sometime after.

Today the Sri Lankan rupee is almost 4 times weaker than the Indian rupee. Despite having the assistance of India, the conditions have continued deteriorating there. These are on account of large funds taken from China and mismanagement on account of the politicians. Only time will tell how the situation unfolds.

Highlights by Aman Agarwal.

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