Skip to content
  • Abstract GD Topics
  • Current Affairs GD Topics
  • Social GD Topics
  • Economic GD Topics
  • Political GD Topics
  • Education GD Topics
  • Environment GD Topics
  • Contact Us
Group Discussion

Group Discussion

  • Abstract GD Topics
  • Current Affairs GD Topics
  • Social GD Topics
  • Economic GD Topics
  • Political GD Topics
  • Education GD Topics
  • Environment GD Topics
  • Contact Us
  • Toggle search form
  • Are influencers really influencing?
    Are influencers really influencing? [ Best ] General GD Topics
  • Every cloud has a silver lining || Best GD Topics Abstract GD Topics
  • Books vs Movies
    ( Best ) Books vs Movies Essay / GD General GD Topics
  • The second wave of COVID-19 [ Best ] Current Affairs GD Topics
  • Gender Equality in the workplace || Best GD Topic Social GD Topics
  • Hope Wins and not Cynicism: GD Topic – Best GD Topics -
    Hope Wins and not Cynicism: GD Topic – Best GD Topics Abstract GD Topics
  • [ Best ] 100 Most Important GD Topics for 2021 Pathfinder
  • How Taylor Swift’s Style Changed When She Started Dating John Mayer Uncategorized

Sri Lanka economic crisis

Posted on September 20, 2021 By Dineshjatdj No Comments on Sri Lanka economic crisis

Sri Lanka economic crisis

What is happening with Sri Lanka’s economy?

Sri Lanka faces a severe crunch in its foreign exchange reserves, with only enough dollars to cover less than two months of imports. By the end of July, Sri Lanka had just $2.36 billion worth of forex, compared to $6.93 billion in August 2020. The Sri Lankan rupee has fallen by 7.5 per cent against the US dollar this year. The Central Bank of Sri Lanka recently increased interest rates in a bid to shore up the local currency—becoming the first central bank in Asia to tighten its monetary policies post the pandemic.

This, even as the country faces the prospect of repaying $1.5 billion of foreign bond payments in January and July. These payments are in part responsible for the crisis: In July, Sri Lanka paid off a $1 billion debt repayment from its foreign exchange reserves.

While Sri Lanka has long borrowed to cover the cost of development, it has for most of its history enjoyed low-interest concessionary loans. But, when Sri Lanka became a middle-income country, it started having to rely on alternative financing sources.

As a story in The Diplomat noted in February, by the end of 2019, 56 per cent of Sri Lanka’s foreign loans were commercial borrowings, mostly of International Sovereign bonds.

Sri Lanka economic crisis

In a bid to stem the tide, Sri Lanka received 554.8 special drawing rights (about $800 million) from the International Monetary Fund. In addition, Sri Lanka’s central bank received $150 million via a currency swap agreement from Bangladesh.

The impact of the balance of payments crisis has translated into rising prices of commodities like sugar, rice, onions and potatoes, while long queues have formed outside stores because of shortages of milk powder, kerosene oil and cooking gas. While imposing rules against hoarding, the government has denied any food shortages. The wide-ranging measure is also aimed at recovering credit owed to state banks by importers.

Concerned over the mounting inflation, rating agency Moody’s placed the Government of Sri Lanka’s Caa1 foreign currency long-term issuer and senior unsecured debt ratings under review for downgrade.

Also Read:- How To Prepare For Group Discussion Tips

  1. What Group Discussion Skills Required
  2. How to Start a GD
  3. What Skills Are Judged In GD?
  4. How to Enter a GD in the Middle of the Discussion
  5. How to prepare for Group Discussion
  6. Read Daily Current Affairs

Reasons of food crisis in Sri Lanka

Depleting forex reserves, depreciating currency, rising food prices

Sri Lanka during the COVID-19 pandemic suffered a severe setback in its tourism industry which contributes to over 10 per cent of the country’s Gross Domestic Product (GDP) and brings in foreign exchange. A setback in the tourism industry of the country has resulted in the depletion of forex reserves from over %7.5 billion in 2019 to approximately $2.8 billion in July 2021.

Due to the depletion in the forex reserves, the country had to increase the amount of money to purchase the foreign exchange to import goods. This increase has led to the depreciation of the Sri Lankan rupee by approximately 8 per cent so far in 2021.

Since Sri Lanka heavily relies on imports to fulfill the basic food supplies in the country, the depreciating currency has further led to a rise in the price of food items.

Sri Lanka govt ban on use of chemical fertilizers in farming

The ban on the use of chemical fertilizers in farming by the Sri Lankan government has led to a reduction in the agricultural production sector. Rajapaksa in 2021 announced his plan to make Sri Lanka the first country in the world with a 100 per cent organic agriculture sector.

Experts noted that the push towards 100 per cent organic farming in a country like Sri Lanka could cut the production of tea and other crops by half and further aggravate the situation than the current one.

Why is Sri Lanka’s economy in trouble?

A number of factors have led to the current economic crisis in Sri Lanka. The tourism industry, which represents over 10% of the country’s Gross Domestic Product and brings in foreign exchange, has been hit hard by the coronavirus pandemic. As a result, forex reserves have dropped from over $7.5 billion in 2019 to around $2.8 billion in July this year. With the supply of foreign exchange drying up, the amount of money that Sri Lankans have had to shell out to purchase the foreign exchange necessary to import goods has risen. So the value of the Sri Lankan rupee has depreciated by around 8% so far this year. It has to be noted that the country depends heavily on imports to meet even its basic food supplies. So the price of food items has risen in tandem with the depreciating rupee.

What has been the government’s response to the crisis?

The Sri Lankan government has blamed speculators for causing the rise in food prices by hoarding essential supplies and has declared an economic emergency under the Public Security Ordinance. The army has been tasked with the duty of seizing food supplies from traders and supplying them to consumers at fair prices. It has also been given the powers to ensure that forex reserves are used only for the purchase of essential goods. The government has refused to end its aggressive push for complete organic farming claiming that the short-term pain of going organic will be compensated by its long-term benefits. It has also promised to supply farmers with organic fertilisers as an alternative. Further, Sri Lanka’s central bank earlier this year prohibited traders from exchanging more than 200 Sri Lankan rupees for an American dollar and stopped traders from entering into forward currency contracts.

Will Sri Lankan govt response solve the economy crisis?

The move to make Sri Lanka a country with a 100 per cent organic farming agriculture sector is expected to aggravate the economic crisis. It will reduce domestic food production significantly and cause a further rise in prices.

Other steps such as capping of prices of food items will cause severe shortages as demand exceeds supply at the price fixed by the government. People are already queuing up outside shops to buy essential goods due to a shortage of supplies.

Deployment of the army with the power to seize supplies from traders will take the incentives from the traders to bring in fresh supplies. This will further cause a drop in supplies and an increase in the prices of food items.

Further, the ban by the Central Bank of Sri Lanka on forward contracts and spot trading of Sri Lankan rupees at above 200 rupees to an American dollar may further fuel the crisis. Due to the ban, if a trader wants to pay more than 200 Sri Lankan rupees for an American dollar to import food or essential item will not be able to conduct the trade.

Also Read:- How To Prepare For Group Discussion Tips

  1. What Group Discussion Skills Required
  2. How to Start a GD
  3. What Skills Are Judged In GD?
  4. How to Enter a GD in the Middle of the Discussion
  5. How to prepare for Group Discussion
  6. Read Daily Current Affairs

Related

International GD Topics, Economic GD Topics, General GD Topics Tags:Depleting forex reserves, depreciating currency, Reasons of food crisis in Sri Lanka, rising food prices, Sri Lanka economic crisis, Sri Lanka govt ban on use of chemical fertilizers in farming, What has been the government’s response to the crisis?, What is happening with Sri Lanka's economy?, Why is Sri Lanka’s economy in trouble?

Post navigation

Previous Post: ( Best ) Caste Census in India GD / Essay / Group Discussion
Next Post: ( Best ) Digital privacy

Related Posts

  • ( Best ) The Taliban in Afghanistan Current Affairs GD Topics
  • What Is a Carbon Tax?
    ( Best ) Carbon Tax Economic GD Topics
  • Agnipath Scheme GD
    Agnipath Scheme GD General GD Topics
  • Open book exams – Pros, Cons & Challenges Education GD Topics
  • Detention policy – Pros & Cons
    Detention policy – Pros & Cons ( Best GD ) Education GD Topics
  • social media polarising society
    ( Best ) Is social media polarising society? Social GD Topics

More Related Articles

( Best ) India and NATO GD Topics Economic GD Topics
confidence vs knowledge essay, confidence depends on knowledge, confidence vs knowledge group discussion, confidence vs knowledge debate, relationship between confidence and knowledge, confidence vs knowledge gd, knowledge creates confidence, knowledge vs self confidence, ( Best ) Confidence vs Knowledge Abstract GD Topics
Is Equality A Myth? Is Equality A Myth? General GD Topics
Agnipath Scheme GD Agnipath Scheme GD General GD Topics
Russia-Ukraine war Russia-Ukraine war [ Best ] Current Affairs GD Topics
( Best ) Is India a Soft Nation? General GD Topics

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

April 2023
M T W T F S S
 12
3456789
10111213141516
17181920212223
24252627282930
« Sep    

Categories

  • Abstract GD Topics (39)
  • Current Affairs GD Topics (28)
  • Economic GD Topics (22)
  • Education GD Topics (12)
  • Environment GD Topics (6)
  • Ethical GD Topics (6)
  • General GD Topics (59)
  • How to Guides (9)
  • International GD Topics (4)
  • Let's Discuss (1)
  • MBA Collages (1)
  • Pathfinder (2)
  • Political GD Topics (6)
  • Science GD Topics (1)
  • Social GD Topics (16)
  • Technology GD Topics (17)
  • Uncategorized (59)

Recent Posts

  • Creator economy
  • Neo-banks vs Traditional banks
  • 5G in India
  • Howard bet that Sarah Michelle Gellar’s marriage to Freddie Prinze Jr.
  • At the White House, Peter Neal and Naomi Biden will wed.

Categories

  • Abstract GD Topics (39)
  • Current Affairs GD Topics (28)
  • Economic GD Topics (22)
  • Education GD Topics (12)
  • Environment GD Topics (6)
  • Ethical GD Topics (6)
  • General GD Topics (59)
  • How to Guides (9)
  • International GD Topics (4)
  • Let's Discuss (1)
  • MBA Collages (1)
  • Pathfinder (2)
  • Political GD Topics (6)
  • Science GD Topics (1)
  • Social GD Topics (16)
  • Technology GD Topics (17)
  • Uncategorized (59)
  • Do deadlines destroy creativity? Abstract GD Topics
  • [ Best ] 100 Most Important GD Topics for 2021 Pathfinder
  • ( Best ) The Taliban in Afghanistan Current Affairs GD Topics
  • ( Best ) India and NATO GD Topics Economic GD Topics
  • Wendy was “left to perish” after she lost access to her bank accounts. Uncategorized
  • Does India need a New Parliament Building?
    ( Best ) Does India need a New Parliament Building? Political GD Topics
  • digital-india
    Digital India – Whom Does it Benefit? Best GD/Essay Education GD Topics
  • Do’s and Don’ts in a Group Discussion Preparation Tips ( Best GD ) How to Guides

Recent Posts

  • Creator economy
  • Neo-banks vs Traditional banks
  • 5G in India
  • Howard bet that Sarah Michelle Gellar’s marriage to Freddie Prinze Jr.
  • At the White House, Peter Neal and Naomi Biden will wed.

Copyright © 2023 Group Discussion.