Is Sri Lanka Bankrupt? Is There a Way Out?

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SALIYA

IS SRI LANKA …………BANKRUPT?
IS THERE A WAY OUT?
 !" #$ %&'("$!)'*+**,-,."/'0*+**!) #
SRI LANKA IN CRISIS – SEARCH FOR A WAY OUT
Sub theme: Economic, political and social facets of the crisis

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SRI LANKA IN CRISIS – SEARCH FOR A WAY OUT
Economic, political and social facets of the crisis
•Introduction:The problem and definitions of Bankruptcy and insolvency
etc
•Methodology: Mixed Methods; quantitative and qualitative analysis
•Preliminary Literature review
•Results
•Interpretations with a brief discussion and then
•The conclusions
5 minutes for questions/comments and responses
 #!& ! # 0

11231
•The country has defaulted on $51 billion USD of
foreign debt,
•Worsening fuel and
food shortages
•Continuing public
outrage…
•Uncontrollable
inflation has hit 70% in October 2022
•Government coffers
run dry…
•Accused of corruption and financial mismanagement
•30 % drop in annual paddy yields 2021.
(ICASL, 2022; CBSL, 2022; Chansoria, 2022, Athas, et al, 2022).

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2
When an organisation is unable to make payment to
its creditors, it files for bankruptcy. A petition
is filed in the court where all the outstanding
debts of the company are measured and paid out if
not in full from the company’s assets.
Bankruptcy filing is a legal course undertaken by
the company to free itself from debt obligations.

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However, on the other hand we can
•Avoid paying creditors legally
•Win sympathy and then,
•Attract donors.

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1
Insolvency refers to a situation where the value of a
company's liabilities exceeds the value of its
assets. Based on the balance sheet; "insolvent on the
books" when its net worth appears negative.
Two forms: Cash flow insolvency (short-term
insolvency, Liquidity issues); when a company is
unable to make payments to vendors or lenders.
Long-term insolvency; creditors and lenders might
force the company to sell assets or declare
bankruptcy (Kenton, 2021a).
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No country can be
classified as
bankrupt including
Sri Lanka which has
a debt ratio of
only 12.72% US$51
billion of debts as
against US$401
billion of wealth.
However, with mere
10-days-imports
worth of foreign
reserves Sri Lanka
is facing a
liquidity crisis,
an immediate Forex
requirement (CGD,
2022).

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We are now participating in the negotiations as a
bankrupt country. Therefore, we have to face a
more difficult and complicated situation than
previous negotiations…this will be a difficult and
bitter journey, (Wickramasinghe, 2022)
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!= !" 7)'(#"&'
Therefore, declaring
bankruptcy is serious,
expensive and painful…
and also, STUPID.

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
External debt is debt owed to
non-residents repayable in
currency, goods, or services.
Total external debt is the
sum of public, publicly
guaranteed, and private
nonguaranteed long-term debt,
use of IMF credit, and short-
term debt. Short-term debt
includes all debt having an
original maturity of one year
or less and interest in
arrears on long-term debt.
Data are in current U.S.
dollars (The World Bank, 2022
Total reserves comprise
holdings of monetary gold,
special drawing rights,
reserves of IMF members
held by the IMF, and
holdings of foreign
exchange under the control
of monetary authorities.
The gold component of these
reserves is valued at year-
end (December 31, FOR 2022-
31 OCTOBER) London prices.
(The World Bank, 2022)

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
Political Stability and Absence
of Violence/Terrorism measures
perceptions of the likelihood
of political instability and/or
politically-motivated violence,
including terrorism. Estimate
gives the country's score on
the aggregate indicator, in
units of a standard normal
distribution, i.e. ranging from
approximately -2.5 to 2.5 (The
World Bank, 2022)
Government Effectiveness
captures perceptions of the
quality of public services, the
quality of the civil service and
the degree of its independence
from political pressures, the
quality of policy formulation
and implementation, and the
credibility of the government's
commitment to such policies.
Estimate gives the country's
score on the aggregate
indicator, in units of a
standard normal distribution,
i.e. ranging from approximately
-2.5 to 2.5 (The World Bank)

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 %6!?)(70$9!! 
there were views that …
in the past that ultra-nationalist groups used to cry loud against
even a slight attempt to implement such liberal strategies/policies. However,
today, the sarcastic silver line is that the those who propagate anti-liberalism,
are seem silent, at least in the parliament, in supporting such reforms
;' & ?9!
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% 0?!"#& 5 
$"#)!""%)
political crisis
…due to poor
planning by
incopetent policy
makers powered by
greedy short-sighted
politicians..

1
In line with these views the
IMF too implies that
countries which have
experienced similar issues
have made major trade and
financial reforms by applying
more liberal economic and
financial policies

1
Also, the IMF is discussing a
possible $3bn (£2.5bn) loan.
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.

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("()# !&%/"!%
/N#5!$O( !$9" !N("9O
$!##&$)(("!?5"'$
CONCLUSIONS
SRI LANKA IS NOT BANKRUPT BUT EXPERIENCING A LIQUIDITY CRISIS., MAINLY DUE POOR PLANNING BY
INCOMPETENT POLICY MAKERS POWERED BY GREEDY SHORT-SIGHTED POLITICIANS..

5"9 &")"5%!$!$7$ 
')#!5 %7 ((" %' !#&P
•Policy reforms9!
•Political stability 5"
•calm, investor-friendly
atmosphere to regain
the reputation, higher
credit rating, positive
investment outlook and
investors’ con9dence.

•>) ! !/  #&$!$/ #7 ("#!!% #
$ 0!#!& $ $!?!@%  $$"%! !"9!0"
A #70$ 75"!?$/$
•>) #! !/  #&$!$$)??$$ "
$ 0#!$() !" 7! !" #
%"@7%(/ !#!?' $$("$$:)$
 $"0#!'! 7:'!!'!Q7
•""!$!$$ 9 7'!!$ !" 7
5"'$ $$! #
•19 &"5 %!/!?' &0"#7!? 
#%!"" ("(#9")#70 0#"
)# $!)$ 7!/$"5!7#&% #'
'"$('!?%"'0 %6
1
1;CONCLUSIONS
SRI LANKA IS NOT BANKRUPT BUT EXPERIENCING A LIQUIDITY CRISIS., MAINLY DUE TO POOR PLANNING BY THE
INCOMPETENT POLICY MAKERS POWERED BY GREEDY SHORT-SIGHTED POLITICIANS..
POLITICAL STABILITY (PS)
•policy reforms9!

•Political stability 5"
Thank you