Sri Lanka is in serious trouble

Sri Lanka’s economy has “completely collapsed” after months of shortages of food, fuel, and electricity, Prime Minister Ranil Wickremesinghe told lawmakers yesterday.

🇱🇰 What’s going on?... The South Asian island nation of 22 million people, which sits in one of the world’s busiest shipping lanes, is struggling with large amounts of debt, lost tourism revenue, other effects of the pandemic, and (surprise!) surging inflation.

• Wickremesinghe said Sri Lanka’s state-run oil company is $700 million in debt, and “as a result, no country or organization in the world is willing to provide fuel to us.”
• The country has already suspended repayment of $7 billion in foreign debt due this year, and must pay $5 billion on average annually until 2026.
• Many middle class families – who, until recently, enjoyed relatively comfortable lifestyles – are now struggling to source three meals a day, as the inflation rate for food climbed to 57% last month.

🌍 Zoom out: Sri Lanka isn’t the only world economy going through a rough patch. Pakistan’s finance minister said last month that the government is in “dire need” of ~$37 billion in foreign financing over the next year to avoid financial collapse, while Afghanistan’s economy is still in shambles nearly a full year after the Taliban assumed power.