Srilanka to go bankrupt by 2022

Srilanka to go bankrupt by 2022

Team Ambitiousbaba are here with a Current Affairs Special Series. In this series, candidates will be introduced to current affairs topics daily, which will not only improve their general awareness but also will ensure that the candidates do not lack in any current affairs topic. Today’s Current Affairs topic is “Srilanka to go bankrupt by 2022

Why Sri Lanka in News?

Sri Lanka is facing deepening financial and humanitarian crisis. In Sri Lanka inflation is grading record highs, food prices surging, and pandemic-caused disruptions driving its coffers dry, the island nation is dreaded to go bankrupt this year.

As per the Guardian (British newspaper) Sri Lanka would have to pay back an estimated $7.3 billion in domestic and foreign loans in the next 12 months. This repayment consist a $500-million international sovereign bond repayment due in January. The accessible foreign currency reserves are just $1.6 billion as of November.

Reasons behind bankrupt situation:

  • The immediate impact of the COVID-19 pandemic and collateral loss of tourism crushed the earning source for the large portion of population in the country which leads less revenue less tax.
  • Sri Lanka’s high government spending and tax-cuts decreased the state revenues.
  • Huge debt load of repayments to China.
  • Country’s record low foreign exchange reserves deepened the economic meltdown in front of the Gotabaya Rajapaksa-led government.

Economic Situation of Sri Lanka:

  • To settle domestic loans and foreign bonds, Sri Lanka increased to print money which leads to inflation at 12.1 percent in December from 9.9 percent in November.
  • The monthly inflation evaluated by the Colombo Consumer Price Index which determined by the monthly increase in prices of both food and non-food items.
  • Food price inflation surged to 22.1 % in December from 17.5 percent in November.

World Bank’s estimation:

The World Bank forecasts in its report that around 500,000 people have fallen below the poverty line since the beginning of the pandemic which is equivalent of five years’ progress in fighting poverty.

AS per the World Travel and Tourism Council, there is loss of jobs and life-sustaining foreign revenue from tourism, which usually consist more than 10 percent of the country’s GDP, has been affluent as now more than 200,000 people losing their livelihoods in the travel and tourism sectors.

President Rajapaksa in his New Year message conveyed hope of reviving the cash-strapped economy but declared no provisions to resolve its incapacitating foreign exchange crisis.

Most of the International rating agencies have rated Sri Lanka at bottom of the measure line and erected worry about its ability to overhaul its debt of $26 billion.

Question & Answer:

Q1. Which country is in news due to its inability of bankrupt?
Ans.  Sri Lanka

Q2. Name the president and prime minister of Sri Lanka.
Ans. Gotabaya Rajapaksa (president), Mahinda Rajapaksa (prime minister)

Q3. What is the capital of Srilanka?
Ans. Colombo, Sri Jayawardenepura Kotte

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