The economic crisis is a result of mismanagement by the Rajapaksa administration (and its predecessors) as well as Sri Lanka’s vulnerability to external shocks. The pandemic and Russia’s invasion of Ukraine have had a devastating impact. The Rajapaksas pursued populist economic policies — including unaffordable fuel and food subsidies and printing money to finance them — that spurred inflation. The president was heavily criticized for a disastrous “100% organic” policy that aimed to reduce the strain on foreign currency reserves by banning the import of chemical fertilizers. The policy resulted in slashed agricultural output at a time when food supplies were already running low and prices were soaring.
Meanwhile, foreign tourism — a key source of jobs, economic growth, and foreign currency — fell after the 2019 Easter bombings and then collapsed during the pandemic. The spike in international commodity prices, which has been exacerbated by Russia’s invasion of Ukraine, has piled further economic pressure on Sri Lanka. The country relies heavily on imports of food, fuel, and other essential goods to feed the people and keep the lights on.
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