SSB Future Officers

Forwarded from SSB Future Officers (Ankit)

#Important_notes_ssb_Lecturette #GD_Material #INTERNATIONAL_CURRENTAFFAIRS

Srilankan Crisis[1/3]

✓Political parties in Sri Lanka are scrambling to form an all-party government, a day after President Gotabaya Rajapaksa and Prime Minister Ranil Wickremesinghe pledged to resign in the wake of historic citizens' protest.

✓The anti-government sentiment across various parts of Sri Lanka has triggered a state of political instability. It is fueled by the anti-government protests and demonstrations by the public due to the economic crisis in the country.

✓The Sri Lankan economy has been facing a crisis owing to a serious Balance of Payments (BoP) problem. Its foreign exchange reserves are depleting rapidly and it is becoming increasingly difficult for the country to import essential consumption goods.

✓The Sri Lankan rupee has lost more than 80% of its value, food costs have skyrocketed by over 50% and tourism- one of the country's main revenue sources has significantly diminished due to the Covid-19 pandemic.

✓Let us understand what led to political and economic instability in Sri Lanka and its impacts.

❗️What Led to the Sri Lankan Crisis?

-Background:

✓When Sri Lanka emerged from a 26-year long civil war in 2009, its post-war GDP growth was reasonably high at 8-9% per annum till 2012.

✓However, its average GDP growth rate almost halved after 2013 as global commodity prices fell, exports slowed down and imports rose.

✓Sri Lanka’s budget deficits were high during the war and the global financial crisis of 2008 drained its forex reserves which led to the country borrowing a 2.6 billion dollars loan from the International Monetary Fund (IMF) in 2009.

✓It again approached the IMF in 2016 for another USD 1.5 billion loan, however the conditionalities of the IMF further deteriorated Sri Lanka’s economic health.

-Sri Lanka’s Fertiliser Ban:

✓In 2021, all fertiliser imports were completely banned and it was declared that Sri Lanka would become a 100% organic farming nation overnight.

✓This overnight shift to organic fertilisers heavily impacted food production.

✓Consequently, the Sri Lankan President declared an economic emergency to contain rising food prices, a depreciating currency, and rapidly depleting forex reserves.

✓The lack of foreign currency, coupled with the overnight ban on chemical fertilisers and pesticides, has sent food prices soaring.

-Recent Economic Shocks:

✓The Easter bomb blasts of April 2019 in churches in Colombo resulting in 253 casualties, consequently, dropped the number of tourists sharply leading to a decline in foreign exchange reserves.

✓The newly led government by Gotabaya Rajapaksa in 2019 promised lower tax rates and wide-ranging SoPs for farmers during their campaign.

✓The quick implementation of these promises further exacerbated the problem.

✓The Covid-19 pandemic in 2020 impacted exports of tea, rubber, spices, garments and the tourism sector.

✓China’s Debt Trap Policy played a significant role in economic instability in Sri Lanka.

✓The Crisis in Sri Lanka is triggered due to a shortage of foreign exchange (forex) reserves, which have dropped by 70% over the last two years to just USD 2 billion by the end of February 2022.

✓Meanwhile, the country has foreign debt obligations of about USD 7 billion in 2022.

-Current Political Vacuum:

✓Prime Minister Wickremesinghe and President Gotabaya Rajapaksa signalled the willingness to resign making way for an all-party government to take over.

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4.7K viewsAnkit, 15:20