IT is an open secret but has now been officially acknowledged that Sri Lanka has gone bankrupt and the challenges are so daunting that the unprecedented economic crisis is likely to persist even in 2023.
Prime Minister Ranil Wickremesinghe told parliament on Tuesday that the once-prosperous country will go into deep recession this year and acute shortage of food, fuel and medicine will continue, warning that the difficulties would continue next year.
The island nation of 22 million is in the grip of its worst economic crisis since independence in 1948, with severe shortage of essential goods and regular blackouts causing widespread hardship.
The country is almost entirely without petrol and the government has shut down non-essential public services in an effort to conserve fuel.
The United Nations estimates that about 80 per cent of the public are skipping meals to cope with food shortage and record prices.
The bad economic situation is also affecting external relations of the country and in a latest move the British Foreign Office has advised against all but essential travel to Sri Lanka.
The magnitude of the challenge can be gauged by the fact that the IMF expects Sri Lanka’s economy to shrink by 7% this year, inflation could climb above 60% and rapid currency depreciation over the past few months had wiped out the value of savings by half.
Attempts are being made to seek a bailout package from the IMF but the Fund is demanding a plan on debt sustainability, which is not an easy task for the bankrupt country.
It has also told authorities to do more to fight corruption and bring an end to costly energy subsidies that had long been a drain on the government budget.
There is a clear lesson for countries like Pakistan to reduce their dependence on foreign loans and firmly pursue policies that lead to self-reliance to help preserve political and economic sovereignty.
