The reasons behind the great crisis in Sri Lanka
The Tamil-backed Pakshe family of South India started as the ruler of Sri Lanka with a lot of fanfare. The country introduces a system of government consisting of at least 26 ministers, including the president and the prime minister's two brothers, from their own families and relatives, which gradually descends into a family system as a dictatorship or a dictator and a detached ruler. Ignoring family interests, arbitrariness, whimsy, extravagance, inability to formulate and implement weak policies, excessive national borrowing and misuse in sectors, failure to develop international relations and utter disregard for public interest Freedom of speech suppressed the spine. Paksha kept the state and the people alienated by giving priority to the comfort of the family.
There is a regional proverb in Bengal: "This year, Bala Muchibat has passed away, one daughter-in-law has died and daughter-in-law has died." The crisis of fuel oil, even the lack of baby food, medicine and equipment, the skyrocketing mass cries and shouts remain insignificant to the Pakshe family. Despite the resignation of Prime Minister Mahendra Raja Pakshe after a long period of public outcry, protests, anti-government protests and international pressure, President Gotabaya Raja Pakshe is still holding on to his throne.
However, Mahendra Raja left a trump card with Paksha "pressing Udor Pindi to the ground" - imposing a state of emergency on the army as well as mobilizing pro-government supporters. Foreign governments, including the United States, Canada and the European Union Human Rights Watch said governments and international organizations, including the International Monetary Fund (IMF) and the World Bank, which are assisting the country in its economic crisis, should urge the government to respect fundamental freedoms.
The anti-government people of the country did not stop again. They have occupied the ground through sporadic clashes, arson, vandalism, and siege. In Sri Lanka, angry mobs clashed with government supporters and set fire to the homes of Prime Minister Mahinda Rajapaksa and some members of the ruling party. Prime Minister Mahinda Rajapaksa was finally forced to resign on Monday, May 9, following a series of mass explosions. On the outskirts of Colombo, a government MP by the name of Amarakirti Athukorala shot dead two disgruntled assailants and shot himself in the head with a pistol. Mahendra Raja Paksha's son and son-in-law left the country on a special state plane.
The scourge of arrogance does not end here, it is time to wait for a bigger tragedy. And these tragedies were born out of the untimely evil and heartless drama of the Paksha family. After independence from the British in 1947, Sri Lanka's economy was largely dependent on agriculture, tourism and exports. In addition to eliminating the dominance of export-oriented crops such as coffee, rubber and spices, a large portion of the total domestic consumption and consumer goods came from the foreign exchange earned from these crops. Again, that money was used to import essential food items. The first mistake of the Sri Lankan government and the Pakse family was to run missiles on agriculture in an unconstitutional manner.
Sri Lanka was the first country in the world to ban chemical fertilizers in agriculture and introduce organic farming methods to reduce agricultural production by 70% compared to the past. The tourism industry has been a lucrative source of income for Sri Lanka's exports. The tourism industry has been hit hard, with Russia and Ukraine having the highest number of tourists from the countries that Sri Lanka used to attract.
Despite the collapse of the country's largest source of income, agriculture and the tourism industry, King Paks's tendency to indulge in extravagant and unplanned loans increased its luxury. The port of Hambantota was built with Chinese funding. In fact, it was leased to the Chinese Merchants Group for 99 years at a cost of US ১ 1.12 billion in exchange. Foreign exchange reserves have risen to ১ 1.12 billion. Many believe that Sri Lanka's debt-ridden economic relationship with China could be one of the reasons for the crisis.
China has called the incident a "debt trap diplomacy." The customary rule is that a creditor country or institution lends money to a borrower's country to increase the lender's political leverage - if the borrower cannot repay, they rely on the creditor's mercy. Faced with a huge deficit, President Gotabaya has cut taxes in a devastating effort to stimulate the economy. But the move is counterproductive, hitting government revenue.
After coming to power in 2019, President Gotabaya Rajapaksa took power as per the election promise and waived the tax. This had a negative impact on revenue collection. The value added tax rate has been reduced from 15% to 6%. Other indirect taxes such as race building tax, pay-as-you-go tax and financial service charges have been abolished.
The corporate tax rate has been reduced from 26% to 24%. The tax cuts have resulted in a loss of about 2% of GDP. President Gotabaya Rajapaksa's tax cuts have pushed the economy to the brink of collapse. Shrinking to ২ 2.2 billion. Due to the deficit balance, it failed to import fuel and other essential commodities, which led to a fire in the domestic commodity market.
On top of all this, the government raised the Sri Lankan rupee against bonds in March - a price that was set based on supply and demand in the foreign exchange market - to provide 22 million people in the country with 12-hour power outages and other essentials such as food, fuel and medicine. Inflation is 16.5% which is the highest ever, where the price of food items such as one kg of rice has gone up from Rs. 40 to Rs. The upper-middle-income countries of the time have now become low-middle-income countries, not just economic development; Sri Lanka ranks 72nd out of 179 countries in the latest UNDP Human Development Index, followed by Bangladesh at 133rd and India at 131st. In other words, the country was not only economically developed, but also in areas such as education and health were in a better position than all other countries in South Asia. The country now has no electricity for more than 12 hours a day. Capital market transactions have been stopped due to disconnected power supply.
The government of the country, which is in dire financial straits, has very little foreign exchange reserves. Due to this, it is not possible to import energy required for power generation. Started. But to get that you have to stand in a long line. Vehicles have stopped due to lack of oil. Many people are fleeing from Sri Lanka to Tamil Nadu, India in the face of dire situation due to skyrocketing prices of essential commodities. Decided to take bailout.
The Sri Lankan delegation will also travel to the United States to discuss the 400 million loan, including with the IMF. However, for the time being this money will not be paid. Aid has also been requested from China and India. New Delhi has already reached US ০ 1 billion in aid by the end of last month. Borrowed.
The IMF has agreed to provide the loan considering the country's precarious situation if it re-applies despite the failure to repay. For example, since 1975, the country has received 17 conditional loans from the International Monetary Fund (IMF). Monetary policy must be maintained, government subsidies for food for the people must be reduced, and currency must be devalued to make exports more effective. The unequal impact was felt from 2016 to 2022 in a broken state.
The country collapses into a fragile economy with inflation burdened by debt. The economic crisis in Sri Lanka is being blamed on the arbitrariness of the country's ruling party. And on the shore.
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