Stranded O̶n̶ ̶A̶n̶ Island
There is a major economic crisis just south of our borders in Sri Lanka. You might've seen videos of massive protests outside the president's house in Colombo. But how did things get so bad?
Sri Lanka's main problem seems to be dependence on imports and the need for foreign currency.
A major source of forex is tourism, which came to a standstill because of Covid in 2020, and a terrorist attack in 2019 targeting major hotels in and around Colombo.
But even before this, they were running a large trade deficit (imports were greater than exports), and had to use reserves to pay import bills.
As a result, forex reserves reached a low point in November 2021 when they only had enough to pay for 1 month's imports.
This year the Russia-Ukraine war has led to a sharp increase in fuel prices, which is also imported. Inflation skyrocketed and was last reported at over 17%, in February.
The country is now struggling to provide electricity, fuel, and basic essentials to citizens, leading to massive unrest. They even had to cancel school exams due to a shortage of paper and a lack of cash to buy essentials.
The military has had to be deployed at petrol stations to "discourage any unrest" as thousands of people are having to wait hours in line to get fuel.
In the past few days things have taken turn for the worse - the whole country is almost out of diesel, needed for transport and power generation. Even reservoirs at the hydropower plants are running low, and the Colombo Stock Exchange had to reduce its trading hours because of the power cuts. Yesterday they had to shut off street lights to save power.
There are 2.2 crore people in Sri Lanka, and their gov is now looking at the IMF for a bailout package, and is also hoping to borrow some money from India and China.
We really hope they're able to get some help quickly because it's really sad to see the common man suffer the consequences of poor policymaking.