New Delhi:
Sri Lankan people are witnessing one of the biggest economic collapses that the world has seen. The Sri Lankan government is facing the crisis from the forefront and are forced to accept this deprivation firsthand. The island country is facing extreme conditions in order to have resources that can quench the thirst of the basic necessities of its people. The foreign reserves had been drained to a point where the required backup of the reserves has dropped to all time low.
There are enormous amounts of debts that have been mounting on Colombo. For quite a time the Sri Lankan people have been protesting on the streets of the island country which has recently turned violent. Tending to a direct consequence which led to the resignation of the Prime Minister of Sri Lanka, Mahinda Rajpaksa. The public anger exploded towards the two prominent Rajpaksa’s of the country i.e. PM Mahinda Rajpaksa and President Gotbaya Rajpaksa.
As the public distrust raised the pressure on the Rajpaksa’s, the PM Mahinda Rajpaksa resigned on Monday. Following his resignation President Gotbaya Rajpaksa has announced that he will ensure a new cabinet is established without the presence of any Rajpaksa in the cabinet. However, his own presence as the President of Sri Lanka will foster around for now.
What led to large scale protests in the island country?
Sri Lanka faced its onset of crisis firstly as the impact of the foreign reserve downfall that led to the shortage of imported food, medicines and fuel. The reduced oil imports also led to many significant power cuts. The pandemic and the ongoing Ukraine-Russia crisis were the two prime factors the Sri Lankan government tried to portray as the cause for the untuned harmony of its people based on the inflation which led to long lines of people waiting to garner basic products and services which is required for day to day subsistence.
The ongoing economic crisis in Sri Lanka has its roots that can be traced back to the point in time in 2019 when President Rajpaksa came to power just after the Easter suicide bombings with a promise to reinstate Sri Lankan economy to a much better shape. The first step was to bring in foreign reserves which came in the form of loans from China as investment into infrastructure projects. His subsequent step was to introduce one of the largest tax cuts in the history of Sri Lanka.
This step turned disastrous for the Sri Lankan economy as the credit streams of foreign reserves from the global market were vehemently blocked leading to a limitation on Sri Lanka’s ability to reinstate foreign currency in its market. There is a downfall in Sri Lanka’s foreign reserves dropping below $50 million. This led to the government for not paying up an amount of $7 billion of foreign debt which is due this year. This amount is nearing $25 billion which will be due by the year 2026 out of a total amount mounting to $51 billion.
The ongoing crisis still has time before it ceases. The new chair that will be spearheading the upcoming cabinet needs to resolve the crisis from its roots if it is willing to reinstate stability in the ongoing economic crisis of Sri Lanka.
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