Multifaceted Challenges Led to Economic Emergency of Sri Lanka in 2021

Abstract

Sri Lankan economy has weathered a rough patch in recent time. COVID-19 wreaked havoc on the tourism industry, which remained the economy's lifeline for a long time. Pandemic jeopardized regular economic activities due to lockdown, curfew, and stringent restriction measures. The sudden change in agricultural practices as per government directives reduced farm output and rural income. Shortage of food supply due to depleted farm output and ban on import led food inflation spiral high. Lack of tourism earning caused decline in foreign exchange reserve for import dependent nation. Remittance from Sri Lankan reduced sharply as many faced layoffs in overseas location. Credit rating agencies of world repute downgraded the sovereign rating of the nation. The economy of Sri Lanka dealt high debt burden and plummeting confidence of foreign investors. There was spike in prices for imported commodities. People stood in long queue to get basic supplies. Sri Lankan rupee depreciated severely in the face of high inflation and receding forex reserve. Economic emergency was declared by Sri Lankan government to tackle unprecedented crisis. Former major general of Army was appointed as Commissioner General of Essential Services to clamp down hoarding and ensure supply of basic necessities. Unless economic policy prescription is correct, economic recovery will get deferred.