Financial crisis.

 Introduction to financial crisis

In financial crisis, asset prices show steep decline in worth, businesses and consumers
are not able to pay their debts, as well as financial institutions expertise liquidity shortages. A
financial crisis usually related to panic or a bank run throughout that investors sell off asset or
withdraw cash from saving accounts as a results of they worry that the worth of these asset can
drop if they remain in this financial institution.
Bursting of a speculative financial bubbles, a stock market cash, a sovereign default, or a
currency crisis are the other situations that may be labeled a financial crisis. A financial crisis is
also restricted to bankers spread thought a single economy. The economy of a locality, or
economies worldwide. There are three type of financial crisis
1. Banking crisis.
2. Speculative bubble.
3. International crisis.

 Description of access to the issues in Sri Lanka

When discuss about the financial crisis of Sri Lanka we have to mainly focus on the reasons for
financial crisis in Sri Lanka. As a result of financial crisis in US (United states of America), it
affected on the financial crisis of Sri Lanka too. The US crisis was the latest financial and
economic crisis which impact on trade and economic growth of Sri Lanka

Reasons.
 Funds invested by foreigners in Treasury Bonds & Bills flowed out from Sri Lanka.
 Employees who are the SL nationals have migrated abroad, couldn’t send their valuable
foreign currency.
 Badly effect on the export of Tea, Rubber, Coconut, Spices, Garments.
 Presentation of statistical data
Exports of garments to Europe vs USA
 Critical investigation.
As a result of the financial crisis in 2008 there was a decline in exports such as tea and
rubber. Decline in growth of Textile and Leather in 2007, 7.3% but in 2008, 3.1 slow
growth, export of Diamonds and Jewellery also affected. As well as increase the
Unemployment and service sector growth decline from 7.1% to 5.6% when it compares
to 2007.
When it comes to Tourism sector, Tourism arrivals dropped by 11.2% in 2008 partly due
to financial crisis. When 2008 compare to 2007, tourist arrivals from the Western
Europe & North American countries has dropped in 15%. As the result of 2008 financial
crisis the lowest economic growth rate of 1.6% indicated by Sri Lanka economy. As well
as indicated lowest average inflation in 2009 was 3.4% since 1985.

 Summary
Here explained the basis of the financial crisis, Types of the financial crisis and impact on
the international trade of Sri Lanka due to the financial crisis. According to this topic we
mainly focused on the reasons of financial crisis in Sri Lanka and briefly discuss the
affected areas. According to this topic it is possible to say that Sri Lanka also affected by
the financial crisis in US. It is impossible to completely avoid the financial crisis, but
through the continuous implementation of appropriate policies we can avoid the
adverse impact.