Sri Lanka on the verge of getting bankrupt, facing record high inflation

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Sri Lanka on the verge of getting bankrupt, facing record high inflation (Image: Pixabay)
Sri Lanka on the verge of getting bankrupt, facing record high inflation (Image: Pixabay)

Colombo : Sri Lanka is facing deep financial crisis and is getting on the verge of getting bankrupt. With inflation scaling record highs, food prices zooming, and pandemic-induced disruptions driving its coffers dry, the island nation is feared to go bankrupt this year.

Another major problem is the repayment of loans from foreign entities. The nation owes an approximate $7.3 billion in domestic and foreign loans that needs to be repayed in the next 12 months.

As of November, the available foreign currency reserves were just $1.6 billion, a Guardian report said.

A spurt in printing money to square off domestic loans and foreign bonds drove inflation to 12.1 percent in December from 9.9 percent a month back. The monthly inflation measured by the Colombo Consumer Price Index was driven by the monthly increase in prices of both food and non-food items.

December food price inflation soared to 22.1 percent from 17.5 percent a month before, the country’s central bank announced.

According to an estimate by the World Bank, more than 500,000 people have fallen below the poverty line since the beginning of the pandemic.

President Rajapaksa in his New Year message expressed hope of reviving the cash-strapped economy but did not announce measures to address its crippling foreign exchange crisis. “I am confident that the new year will provide an opportunity to further the steps taken by the government to pursue and overcome challenges and strengthen the people-centric economy,” he said.