Sri Lanka Crisis: India Helps, China Holds Back - Complete Study
The crisis in Sri Lanka is so bad that, at this point, there is a lack of food: a shortage of fuel, long power cuts and a tremendous rise in prices across the panel.
So, what is the reason behind this? What has compelled this economic crisis – the worst that Sri Lanka has ever been?
This breakdown has got ensured by a lack of foreign currency, which has led to a decline in the imports of essential items; Sri Lanka relies laboriously on imports, which can be for necessities like food, sugar, rice, petroleum, paper, medicines, cement and much more. The deficiency of foreign currency has drilled these imports so ill; in fact, the Sri Lankan state has had to cancel all examinations for schools for millions of children only because they did not have paper. There have been long rows of people waiting to buy meals and fuel.
The army stood to stop protests from failing out at petrol pumps because people had begun opposing them there. There was news that three people parted while waiting for fuel in a line for several hours. So how has the deficiency of foreign currency occurred?
Last week, The Sri Lankan president said in an oration to the country that the country has a trade depletion of $10 billion. It indicates that the country imported more items last year than it shipped. That means more money moved out of the country and less money reached into the country. Over the years, this guideline has led to a shortage of foreign currency within Sri Lanka. Another reason that the foreign currency accounts have gone down; is that foreign direct investment into the country has also plunged over the last few years.
On March 17th, India declared a $1 billion line of credit to Sri Lanka to procure food, medicines, and other paramount items. Last month, India raised a $500 million line of credit to Sri Lanka to enable it to buy petroleum products. But ironically, one of Colombo’s closest friends. China has counted on their issues and hinged out to be hastily from China over the last few years supporting its infrastructure projects. Before the pandemic, Sri Lanka owed China; about $5 billion, amounting to 10% of the country’s external debt, which gets loomed by sovereign adhesives. Faced with the economic crisis now: The Sri Lankan President has asked China to restructure its debt to the government.