Aishwarya Deshpande, Jindal Global Law School, Haryana
ABSTRACT
The island nation of Sri Lanka is currently experiencing an ongoing economic crisis that began in 2019. Since gaining independence in 1948, this country has experienced its worst economic crisis. Unprecedented levels of inflation, a close to complete depletion of foreign exchange reserves, a shortage of medical supplies, and an increase in the cost of essential commodities are the results. According to reports, a number of interrelated reasons, including tax reductions, money creation, a national initiative to switch to organic or biological farming, the 2019 Easter bombings in Sri Lanka, and the COVID-19 pandemic's effects in Sri Lanka, are what caused the crisis to start. The consequent economic woes led to the protests in Sri Lanka in 2022.
Large-scale borrowing at high-interest rates with rigorous restrictions from international financial organisations is the main cause. The second argument was then the national ban on chemical fertilisers. Due to the massive increase in the yearly income level for personal income tax waivers and the decrease in Value Added Tax rates, the third one led to a considerable revenue loss for the government. The fourth factor was the government's decision to implement its organic agricultural policy across the board, which had a considerable detrimental effect on yield. The sixth was that because of the Covid-19 outbreak, the island nation's tourism industry is having serious issues and fewer visitors are visiting there frequently. China has also played a significant role in the fall of the nation’s country.
Keywords: Debt crisis, Financial Regulations, International Monetary Fund (IMF), Sustainability, short on foreign exchange.
