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Turmoil in Sri Lanka as thousands protest-EnglishHindiBlogs-News

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In June, Prime Minister Ranil Wickremesinghe – who now says he is ready to resign as protesters stormed both his and the president’s residence over the country’s economic crisis – said Sri Lanka’s economy “Completely collapsed.”

Sri Lanka is in the middle of Worst financial crisis in seven decadesThis followed a record fall in its foreign exchange reserves, with the dollar exhausted to pay for essential imports including food, medicine and fuel.

The government recently took drastic measures to deal with the crisis, including Implementing a four-day work week For public sector workers to give them time to grow their crops. However, the measures are doing little to ease the conflicts being faced by many in the country.

In several major cities, including the commercial capital, Colombo, hundreds of people line up for hours to buy fuel, sometimes clashing with police and the military while waiting. The frequency of trains has decreased, forcing passengers to sit in coaches and even precariously sit on top of them when they go to work.

Patients are unable to go to hospitals due to lack of fuel and food prices are rising. Rice, a staple in the South Asian nation, has disappeared from shelves in many stores and supermarkets.

Wickremesinghe, who forced his predecessor Mahinda Rajapaksa to resign after violent protests, in comments in June blamed the previous government for the situation in the country.

“Reviving a country with a completely collapsed economy is no easy task, especially one that is dangerously low on foreign reserves,” he said. “If steps had been taken to slow the collapse of the economy at least initially, we would not be facing this difficult situation today.”

Sri Lanka has been mainly dependent on neighboring countries India To stay afloat – it has received $4 billion in credit lines – but Wickremesinghe said that may not even be enough.

He said the next step is to enter into an agreement with the International Monetary Fund (IMF).

“This is our only option. We should take this route. Our aim is to discuss with the IMF and reach an agreement to get additional credit facilities,” Wickremesinghe said.

Some references: For the past decade, the Sri Lankan government had borrowed vast amounts of money from foreign lenders and expanded public services, according to Murtaza Jafferji, president of the Colombo-based think tank Advocate Institute. As government borrowings increased, the economy was hit by major monsoons in 2016 and 2017, which hurt agricultural production. A constitutional crisis in 2018And this Deadly Easter bombings in 2019.

30% is bad luck. 70% is mismanagement,” he said.

In 2019, newly elected President Gotabaya Rajapaksa cut taxes in an effort to stimulate the economy.

“He misdiagnosed the problem and felt he had to provide fiscal stimulus through tax cuts,” Jafferji said.

In 2020, the pandemic hit, Sri Lanka’s tourism-dependent economy stalled as the country closed its borders and imposed a lockdown and curfew. A huge deficit was left with the government.

Shantha Devarajan, an international development professor at Georgetown University and former World Bank chief economist, says tax cuts and the economic malaise have hit government revenues, prompting rating agencies to downgrade Sri Lanka’s credit rating to near-default levels. – meaning the country has lost access to foreign markets. ,

Sri Lanka fell back on its foreign exchange reserves to pay off government debt, reducing its reserves to $2.2 billion from $6.9 billion in 2018, according to an IMF briefing.

Cash crunch affected imports of fuel and other essential commodities and, in February, Sri Lanka cut power to deal with the fuel crisis that had driven up prices, even before the global crisis. Russia launches unprovoked invasion of Ukraine,

In May, the government issued the Sri Lankan rupee, effectively devaluing it as the currency depreciated against the US dollar.

Jafferji described the government’s moves as a “series after mistake”.

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CNN’s Rukshna Rizvi and Julia Hollingsworth contributed reporting to this post.

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