Swarajya's video: Sri Lanka Economic Crisis Explained: Debt More Than GDP Rajapaksa Government Struggles

Sri Lanka faces its worst economic crisis in decades. The Mahinda Rajapaksa government is struggling to pay for essential imports after a 70 per cent drop in foreign exchange reserves over two years triggered a currency devaluation. Fuel is in short supply, prices of food and essential goods have increased and protests have broken out as the government preps for talks with the International Monetary Fund amid concerns over its ability to pay $4 billion in foreign debts this year, including a $1 billion international sovereign bond that matures in July. The IMF has indicated it stands ready to help. The Sri Lanka government is due to hold talks in April but the global financial body has sounded a warning note. A report released Friday said the island nation faces 'solvency' issues due to risks from unsustainable debt levels. The crisis is widely seen as a result of mismanagement of government finances and ill-timed tax cuts, in addition to the impact of the COVID-19 pandemic. The war in Ukraine hasn't helped either; fuel costs surged 40 per cent in a week. Essentially Sri Lanka is deeply in debt - by some estimates it owes around 119 per cent of its GDP, which means it has borrowed more money than it can produce via goods and services. Primary creditors include China and the Asian Development Bank. 36 .4 per cent of Sri Lanka's debt is in international sovereign bonds, with the ADB (14.6 per cent), Japan (10.9 per cent) and China (10.8 per cent) next on the list. Subscribe to Swarajya on YouTube. Get a Swarajya subscription: https://subscriptions.swarajyamag.com/join-us Website: https://swarajyamag.com/ Twitter: https://twitter.com/SwarajyaMag Facebook: https://www.facebook.com/swarajyamag