Sri Lanka- A Nation in economic crisis

An island nation with potential in terms of tourism and local industries, its growth is what drives the entire economy. The economy is one of the growing economies in the Southeast Asian region. The pandemic struck the world economy, Sri Lanka has been in a severe crisis. Driving the economy today is a problem of bankruptcy, which the nation is struggling to get past the situation. The nation in 2021, had set an exchange rate with the United States dollar to 203SLR per unit. Within the adoption of this, the economy started facing adverse impacts upon this adoption. With the restriction being pegged at the said rate there is no flexibility in terms of the expenditures in the foreign lands with which the nation tends to trade with. The shortage has adversely affected all its functions, despite standing strong with their decision and making no amends. A new problem that has come into this creation of a black market where the exchange rate is now pegged at 240SLR per unit of USD. This was being done to tackle the shortage, which is detrimental to the economy. This has resulted in a multitude of problems.

This is led to the problem of severe problems in terms of providing the services on shipping and airline services in their home country. The problem comes in terms of the payment of the goods and services since many of them are being paid in US dollars. This has caused a lot of problems in terms of providing services like reduction of flights and cruise travels. All this has impacted the economy.

The central bank has a new policy where with every exchange in the foreign currency some percentage amount of cash in the transaction would be going to the central bank of the nation. So, in case of a given transaction, the central bank of Sri Lanka would now charge a percentage charge of 25%. This has become a huge hurdle for the majority of the importers in the nation. To pay the bills with the transactions made with foreign lands, now they have to shell out more to pay back the desired amount. Though this is to curb the existence of a ‘black market’ in the nation, this is adding more pressure to the nation in terms of their trade and commerce industry. With the given economic difficulties witnessed, its neighbor, India has extended its support to battle out the crisis. The nation has offered $400 million via a ‘cash swap scheme’ to Sri Lanka. This along with the cash deferment of the $500 million Asian Clearing Union, added some amount of cushion to the problems they have to battle out at present-day crisis.

Currently, this is an important economic crisis that Sri Lanka is facing. The intention of the nation to strengthen its nations have not gone in favour, due to the changing scenario, in the pandemic times. We can hope that the nation gets back to its track and continue to invite international counterparts to promote its growth sooner.