This is the story of Sri Lanka Crisis – The biggest Financial Crisis!
Because they have Borrowed much more than what they earn. Today, Sri Lanka does not have money to even buy essentials.

Now let us understand this problem, And let us see How India is helping our southern neighbor?

The economy of Sri Lanka

Let us understand about Sri Lanka’s economy first:

The Sri Lankan economy is primarily dependent on 2 things: Tourism & AGRI Exports (Which include garments, rubber, tea, and coconuts). After Sri Lanka got its Independence in 1948, The world looked at the newly independent state with optimism – reason: Geographic Location.

Sri Lanka is strategically important in the Indian Ocean, It could connect west to east using trade. But Sri Lanka doesn’t have money to develop ports.

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Sri Lanka: Problem with Foreign Investment

So, why didn’t the rich countries invest in Sri Lanka?

1983: Start of a Civil War – ” Sri Lanka not getting foreign investments as fast as expected: Finance Minister ” (Source: economynext)

Even then with high hopes: Sri Lanka wanted to work on Hambantota Port

Sri Lanka: Chinese Debt Trap

Sri Lanka then finally went to China – And it took a loan from China to complete the port.

China’s Strategy is Mind Blowing
1. China invests its money in developing countries.
2. Chinese companies construct those projects.
3. Chinese banks lend money for the projects.
4. And when there is pressure on the economy, China watches those projects fail.
5. Then China buys those projects at a discounted rate.
6. China earns Interest, Profit, and it strengthens its international position as well.

China has funded 70% of Sri Lanka’s development projects.

Hambantota Port

Hambantota Port which could have made South Sri Lanka a trade hub – did not live up to its potential, and was a flunking token of political corruption.

Because of all these factors – The Sri Lankan Economy was already on shaky grounds.

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Impact of Covid on the economy

As a result,

Sri Lanka did not have forex reserves to buy essentials items (like sugar, rice, wheat, petrol)

What can India learn from this Crisis?

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