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Sri Lanka's Economic crisis-An Eye Opener

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Mohammed Nazeeruddin at KVR GOVERNMENT DEGREE COLLEGE FOR WOMEN, KURNOOL- ANDHRA PRADESH
Mohammed Nazeeruddin
  • KVR GOVERNMENT DEGREE COLLEGE FOR WOMEN, KURNOOL- ANDHRA PRADESH
Mr M Jafarullah Baig at KVR GOVT COLLEGE FOR WOMEN, KURNOOL, INDIA
Mr M Jafarullah Baig
  • KVR GOVT COLLEGE FOR WOMEN, KURNOOL, INDIA
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Abstract

The Island country, Sri Lanka exports largely textiles, garments, rubber, tea, and coconut products and imports consumer goods, especially crude oil, coal and other petroleum products. For the first time in the history of Sri Lanka the worst economic crisis has been witnessed. The present government is grossly responsible for this kind of economic mess in Sri Lanka. People from all walks of life in Sri Lanka are struggling for want of sufficient money, fuel and food. This kind of misgovernance results in cascading effect which paralyses all the crucial and vital sectors of the economy.
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RESEARCH REVIEW International Journal of Multidisciplinary
e-ISSN: 2455-3085 | Vol.07 | No.04 | April 2022 | pp. 01-02
Double-Blind Peer Reviewed/Refereed Journal
https://www.rrjournals.com/ Page | 1
RESEARCH PAPER
Sri Lanka’s Economic crisis- An Eye Opener
*1Dr. M. Nazeeruddin and 2Mr.M.Jafarullah Baig
1Reader in Economics, KVR Govt. College for Women (A), Kurnool
2Selection Grade Lecturer, KVR Govt. College for Women (A), Kurnool
Abstract
The Island country, Sri Lanka exports largely textiles, garments, rubber, tea, and
coconut products and imports consumer goods, especially crude oil, coal and other
petroleum products. For the first time in the history of Sri Lanka the worst economic
crisis has been witnessed. The present government is grossly responsible for this kind of
economic mess in Sri Lanka. People from all walks of life in Sri Lanka are
struggling for want of sufficient money, fuel and food. This kind of misgovernance
results in cascading effect which paralyses all the crucial and vital sectors of the
economy.
Keywords: Sri Lanka, Economics Crisis and Flawed Policies
Article Publication
Published Online: 15-April-2022
*Author's Correspondence
Dr. M. Nazeeruddin
Reader in Economics, KVR Govt.
College for Women (A), Kurnool
mnazeeruddin90[at]gmail.com
10.31305/rrijm.2022.v07.i04.001
© 2022The Authors. Published by
RESEARCH REVIEW International
Journal of Multidisciplinary. This is an
open access article under the CC BY-
NC-ND license
(https://creativecommons.org/licenses/
by-nc-nd/4.0/)
Introduction
Sri Lanka is one of the most beautiful Islands in the world, previously known as Ceylon. It is a Democratic
Socialistic Republic of Sri Lanka, situated in the South Asia. The current population of Sri Lanka in 2022 is 2.15
crores. The Sri Lanka Rupees is the currency of Sri Lanka, issued by the Central Bank of Sri Lanka. The symbol of
Rupee is generally used currency code as LKR in Sri Lanka. The Island country, Sri Lanka exports largely textiles,
garments, rubber, tea, and coconut products and imports consumer goods, especially crude oil, coal and other
petroleum products.
For the first time in the history of Sri Lanka the worst economic crisis has been witnessed. The present
government is grossly responsible for this kind of economic mess in Sri Lanka. People from all walks of life in Sri
Lanka are struggling for want of sufficient money, fuel and food. Politicians across the world make tall promises
during the election campaign, but once they come to power, they are going to introduce popular schemes, which
is detrimental to the health of the economy. The very intention behind all these schemes is to remain in power for
a long time by appeasing all sections of the people by putting the economy in doldrums. The popular scheme
would certainly hurt the country’s economy. This kind of mis governance results in cascading effect which
paralyses all the crucial and vital sectors of the economy.
Objectives of the study
1. To study Sri Lanka’s economic crisis
2. To study the surge of prices of essential commodities
RESEARCH REVIEW International Journal of Multidisciplinary Vol.07 | No.04 | April 2022
https://www.rrjournals.com/ Page | 2
3. To analyze the increase of crude oil prices in Sri Lanka
4. To examine the fall of exports and increase of imports
5. To identify the factors which are largely responsible for the crisis
Reasons for Sri Lanka’s Economic Meltdown:
The first and foremost reason was the huge barrowings at high interest rate with strong conditions from
international financial organizations. The second reason was the ban on chemical fertilizers all over the country.
The third one was the huge raise of the annual income threshold for waiver of personal income tax and reduction
of Value Added Tax rates that led to huge revenue loss to government. The fourth one was that the government
implementing the policy of organic farming all over the country which led to a great loss of yield. The fifth one
was the tourism industry is in deep troubles and the number of foreign visitors to the Island nation has been
gradually come down. The fact of the matter is that the tourism industry places a vital role in the economy and it
generates nearly 20% income to the national income. This sixth one was the two and half decade ago war compel
the policy makers to go for the deficit budgets that resulted slow economic growth. Further, there was a huge fall
in the exports led to the drain of foreign exchange reserves. The high fiscal deficit and ill-advised reforms in the
tax system has been adversely affect the health of the economy and pushed the country into economic meltdown.
Results of the study:
The findings of the article are that the misguided, mismanagement and flawed policies of the present government
is largely responsible for the economic crisis in Sri Lanka. we, observed that the ban on chemical fertilizer has
brought down yields more than 30% in paddy, tea and coconut, that resulted the surge in of prices of the essential
commodities and the inflation rose to 17%. Further, there is fall in the productivities of tea and rubber which
again led to lower export incomes. This obviously speaks volumes about the increasing of imports and the
shortage of foreign exchange reserves.
Methodology:
This article largely banks on the secondary sources, the related data and the information for the article has been
collected from various web sources, and daily newspapers. All the collected data and the information are
presented systematically, there by meaningful inferences have been drawn. Besides, the article highlights the
prevailing pathetic economic situation in Sri Lanka
Conclusion
Sri Lanka is one of the most beautiful Islands in the world, previously known as Ceylon. It is a Democratic
Socialistic Republic of Sri Lanka, situated in the South Asia. The current population of Sri Lanka in 2022 is 2.15
crores. The Sri Lanka Rupees is the currency of Sri Lanka, issued by the Central Bank of Sri Lanka. The symbol of
Rupee is generally used currency code as LKR in Sri Lanka. The misguided and the flawed policies are largely
responsible for the economic crisis in Sri Lanka. This article throws light on the economic mess in Sri Lanka, the
GDP growth rate has come down, investment and savings rate fell, increase of imports and decrease of exports,
public expenditure and debt has been enormously increased. Therefore, the mismanagement of the planners and
administrators are responsible for the deep crisis. In recent times, most of the policy makers all over the world
introducing popular schemes to remain in the power for a long time. Hence, such popular schemes would
certainly damage the economy and eaten away the fruits of the economic growth.
References
Sri Lanka Rage- published in “The Hindu” on April 02, 2022
Explaing the Sri Lanka's Economics Crisis – R. Ram Kumar published in 'The Hindu' on march 31st 2022
Sri Lanka growth rate 1950-2022 Macro trends
SLR – Sri Lanka Rupee (LKR) Coly Mitchell published on October 27th 2021
... Sri Lanka is currently facing its worst economic crisis since its political independence from British rule, following the COVID-19 pandemic. The COVID-19 pandemic triggered the most extensive economic crisis throughout the globe, but according to the article by Nazeeruddin, the economic crisis in Sri Lanka is not entirely due to the negative effect of the COVID-19 [13]. The researcher highlighted several reasons which led Sri Lanka into the current economic crisis in the study. ...
... Huge loans worth of USD 56.34 billion in 2020 taken by governments with higher interest rates compared to previous borrowings from international financial organizations is emphasized as one of the key reasons. The reduction of tax rates caused a huge revenue loss to the government from 11.6% in 2019 to 8% of the total revenue in 2020 [13]. The reduced number of foreign arrivals from 2,521,000 in 2018 to 540,000 in 2020 crippled the tourism industry in Sri Lanka which generally generated 20% of its national income [13]. ...
... The reduction of tax rates caused a huge revenue loss to the government from 11.6% in 2019 to 8% of the total revenue in 2020 [13]. The reduced number of foreign arrivals from 2,521,000 in 2018 to 540,000 in 2020 crippled the tourism industry in Sri Lanka which generally generated 20% of its national income [13]. ...
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... Further, it is mentioned that the huge economic recession will cause to major issues, which relate to unemployment, material shortages and reduction of FDIs than any downturn (Edmund et al., 2018). Recent studies confirm that due to the pandemic and recent past of Sri Lanka, FDI has been reduced since 2019 (Nazeeruddin & Baig, 2022;Joseph, 2022). Moreover, during the stable economic situation in 2017 and 2018, Sri Lankan construction industry was mainly driven by FDIs than local government funds (Daily FT, 2018). ...
FOREIGN DIRECT INVESTMENT: DETERMINANTS AND EFFECTS ON SRI LANKAN CONSTRUCTION FOREIGN DIRECT INVESTMENT: DETERMINANTS AND EFFECTS ON SRI LANKAN CONSTRUCTION INDUSTRY
Conference Paper
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  • Nov 2024
Sri Lanka's construction industry faces significant challenges, including economic instability, political uncertainty, and infrastructure deficits. This research investigates the determinants and impacts of Foreign Direct Investment (FDI) within the sector, exploring how FDI can address these challenges. A qualitative approach was employed, involving 13 semi-structured interviews with industry professionals and officials from the Board of Investment (BOI) to explore the key factors influencing FDI inflows, such as economic growth, political stability, and infrastructure quality. The findings reveal that FDI positively contributes to technology transfer, enhanced productivity, and capital formation. However, concerns remain regarding wage disparities, environmental impacts, and the alignment of foreign investments with national interests. The study provides a detailed understanding of FDI's role in fostering sustainable growth in Sri Lanka's construction industry, offering valuable insights for policymakers and stakeholders.
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... Additionally, the economic crisis significantly impacts the construction industry and the contractor's budget (Edmund et al., 2018). According to Nazeeruddin and Baig (2022), Sri Lanka's construction industry has been appreciably impacted by the current economic crisis. A wide variety of construction projects have also been appreciably behind schedule or suspended as a result of the economic crisis in Sri Lanka (Jayamal et al., 2023). ...
Framework to Manage the Impacts on the Contractor's Budget for Construction Projects Due to the Economic Crisis in Sri Lanka
Article
Full-text available
  • Dec 2023
While several studies have separately investigated the management of the contractor's budget and the impact of the economic crisis in Sri Lanka, the novel contribution of this study lies in its unique exploration of the synergy between these two crucial areas. Therefore, this study aimed to assess how to manage the impacts of the economic crisis on the contractor's construction budget in Sri Lanka This research study successfully identified the factors influencing the contractor's budget amid the economic crisis in Sri Lanka, along with effective solutions to mitigate these impacts. For that, the qualitative approach with semi-structured interviews using experts for the data collection through three qualitative Delphi rounds was used. The collected data were analyzed using manual content analysis. In there, twenty-three (23) significant factors as factors affecting the contractor's budget due to the economic crisis in Sri Lanka, eleven (11) effects of the economic crisis on the construction industry in Sri Lanka, and eighteen (18) solutions to reduce the impact of the Sri Lankan economic crisis on the contractor's budget were identified. Finally, a framework was developed based on the findings which will hold significant value for Contractors as that provides valuable insights and practical measures to counter the challenges posed by the economic crisis on construction projects.
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Sri Lanka Rage-published in
  • Apr 2022
Sri Lanka Rage-published in "The Hindu" on April 02, 2022