Context
A Quick Review Of The Sri Lankan Crisis As President, PM Announce Resignations
Economic crisis in Sri Lanka
Protestors stormed into Sri Lankan President Gotabaya Rajapaksa’s official residence and torched the private residence of PM Ranil Wickremesinghe.
Sequence of events: Sri Lanka is going through the worst economic crisis and the Rajapaksa brothers are held responsible for it.
While Mahinda Rajapaksa had quit as PM in May, President Gotabaya had been ignoring calls for his resignation for quite some time.
By the time demonstrators unleashed their anger inside the presidential palace on 9 July afternoon, Gotabaya Rajapaksa had already fled. Later, he announced he would step down on 13 July.
Wickremesinghe called for an emergency meeting and announced that he too would step down. Despite the announcement, his private home was set on fire.
Sri Lanka's economy: It's the worst economic crisis for the country since independence from Britain in 1948. Sri Lanka needs to obtain at least $4 billion to tide over the acute shortage in foreign exchange reserves.
The government owes $51 billion; its currency has collapsed by 80 per cent, making imports more expensive, and inflation, already out of control, is getting worse with food costs rising 57 per cent.
Tourism was an important engine of economic growth, but it has sputtered because of the pandemic and the safety concerns arisen after the terror attacks in 2019.
Sri Lanka’s inflation topped 50 per cent in June after two years of money printing and an attempted float botched with a surrender requirement that sent the rupee sliding to 360 to the US dollar from 200.
Financial assistance: India is willing to help Colombo towards a quick economic recovery by promoting investments and connectivity, and strengthening economic linkages.
India’s recent economic aid stands at $3.5 billion. Development assistance extended by India stands at over $5 billion.
After the events of 9 July, the IMF said it is closely monitoring the ongoing developments in Sri Lanka.
The IMF had concluded a round of policy-level talks with Wickremesinghe, who was also the Finance Minister; there were some financial issues to be resolved.
Experts believe that any assistance from the IMF or World Bank should come with strict conditions to make sure the aid isn’t mismanaged.
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