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Sri Lanka - Economic Crisis - BBC News
Sri Lanka - Economic Crisis - BBC News
Sri Lanka - Economic Crisis - BBC News
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REUTERS
By Ayeshea Perera
BBC News
Sri Lankan Prime Minister Ranil Wickremesinghe has told the country's
military to do "whatever is necessary to restore order", after protesters
stormed his office.
https://www.bbc.com/news/world-61028138 1/11
11/01/2023, 13:20 Sri Lanka: Why is the country in an economic crisis? - BBC News
crisis.
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People have been struggling with daily power cuts and shortages of basics
such as fuel, food and medicines.
The country doesn't have enough fuel for essential services like buses, trains
and medical vehicles, and officials say it doesn't have enough foreign currency
to import more.
This lack of fuel has caused petrol and diesel prices to rise dramatically.
In late June, the government banned the sale of petrol and diesel for non-
essential vehicles for two weeks. Sales of fuel remain severely restricted.
Schools have closed, and people have been asked to work from home to help
conserve supplies.
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11/01/2023, 13:20 Sri Lanka: Why is the country in an economic crisis? - BBC News
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Watch: Police fire tear gas at Sri Lanka protesters storming the prime minister's office
And in May it failed to make an interest payment on its foreign debt for the
first time in its history.
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11/01/2023, 13:20 Sri Lanka: Why is the country in an economic crisis? - BBC News
Long queues for fuel - like this one in Colombo - have made normal life impossible
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EPA-EFE/REX/SHUTTERSTOCK
Failure to pay debt interest can damage a country's reputation with investors,
making it harder for it to borrow the money it needs on international markets.
But, on Wednesday, hundreds of protesters stormed his office, amid calls for
his resignation.
REUTERS
Mr Wickremesinghe has been prime minister six times, without seeing out a full term in office
The country owes more than $51bn (£39bn) to foreign lenders, including
$6.5bn to China, which has begun discussions about restructuring its loans.
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11/01/2023, 13:20 Sri Lanka: Why is the country in an economic crisis? - BBC News
The G7 group of countries - Canada, France, Germany, Italy, Japan, UK and the
US -My
hadResearch FolderSri Lanka's attempts to reduce its debt repayments.
said it supports
The World Bank has agreed to lend Sri Lanka $600m, and India has offered at
least $1.9bn.
But it would require a stable government that could raise interest rates and
taxes to help fund the deal, so any bailout may be delayed until a new
administration is in place.
GETTY IMAGES
The country has asked Russia and Qatar to supply it with oil at low prices to
help reduce the cost of petrol.
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11/01/2023, 13:20 Sri Lanka: Why is the country in an economic crisis? - BBC News
It also says tourists were frightened off by a series of deadly bomb attacks in
2019.
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GETTY IMAGES
Mr Rajapaksa's departure ends a family dynasty that has dominated Sri Lanka's politics for the past two
decades
At the end of its civil war in 2009, Sri Lanka chose to focus on providing goods
to its domestic market, instead of trying to boost foreign trade.
This meant its income from exports to other countries remained low, while the
bill for imports kept growing.
Sri Lanka now imports $3bn (£2.3bn) more than it exports every year, and that
is why it has run out of foreign currency.
At the end of 2019, Sri Lanka had $7.6bn (£5.8bn) in foreign currency reserves,
which have dropped to around $250m (£210m).
Mr Rajapaksa was also criticised for big tax cuts he introduced in 2019, which
lost the government income of more than $1.4bn (£1.13bn) a year.
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11/01/2023, 13:20 Sri Lanka: Why is the country in an economic crisis? - BBC News
The switch to organic fertilisers resulted in widespread crop failure, exacerbating foreign currency
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shortages
This led to widespread crop failure. Sri Lanka had to supplement its food
stocks from abroad, which made its foreign currency shortage even worse.
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