Sri Lanka defaults on its $51 billion external debt

[Mometaskers]

This is only going to get worse for Sri Lankans. They are in need of food imports and after the government defaulted on loans, who would lend them money now? They'd quickly run out of money buying food and then what happens when that remaining money is gone too? They all gonna starve without aid.

I would say let the people rise up and depose their corrupt leaders and then help restructure after. Just blindly pumping it with aid would only result in the same experience as in Africa where no matter how much aid is sent, nothing really changes since the politicians that are the problem remain in power.

[alexeyneu]

wion report on sri lanka gas troubles https://www.youtube.com/watch?v=ic7cdDFZO6A

the prospects of a full imbargo on russian oil and products complicating matters further

whatever she meant

bs

you're not among yourselves

[amishmanish]

Lankan economy became debt ridden only after they took huge loans for so called infrastructure development from china. They were expecting big gains from projects, but those projects actually never completed.  Moreover the tourism sector also died off during covid. The Ceylon tea estates also suffered greatly due to non availability of fertilizers in recent times.. However during all this period the debts kept mounting, and now they are in a bad debt trap.

Some politicians made money and the country became bankrupt.. This is a classical case when too much greed killed the golden goose

[DrBeer]

It's a pity ... I really like Sri Lanka, at least as a tourist country (although the last time I was there was in 2018 or 2019). Beautiful nature, site, people, cuisine...
Unfortunately, I did not follow the development of the situation in the country's economy. What was the reason for this "final"?
It is difficult to recognize Sri Lanka as the most successful country, of course, but somehow I did not observe noticeable problems, at least until 2018/2019. Can anyone name the reasons?

[alexeyneu]

they've banned fertilizers in 2019 or so. organic farming is an experimental thing that may went wrong in terms of money.

[stompix]

It is difficult to recognize Sri Lanka as the most successful country, of course, but somehow I did not observe noticeable problems, at least until 2018/2019. Can anyone name the reasons?

Economic death spiral.
It started with populism, wanting to cut taxes but they went beyond what the budget could afford, you can't tax cut and at the same time rise incentives for not doing anything, one of the few times the FMI was right, you can't improve the economy by cutting VAT and covering that from money printing, at least if those tax reductions would have gone to production, but no!

Then COVID happen right after a terrorist attack so tourism was destroyed, there was no income and they started printing more and more and somehow managed to get even more debt on the way and of course, the debt was in other currencies not in their own, a little Weimar of their own.

On top of that a few final nails in the coffin, one of the eco madness that, of course, destroyed production of food, making less food per ha and more expensive, that in a country that is beyond the 100th place when it comes to GDP per capita, resulting in the awesome magical trick of losing places beyond that when it comes to GDP PPP, purchasing power, a clear sign of personal finances going down the drain. And more the fact that they still have to finance money-losing projects or they would face far bigger financial losses and workplaces, the textile industry hiccups during covid which left a huge mark last year, this year skyrocketing cotton prices, and so on and on.

Bad decisions were made at the worst possible moment and short term there is no miracle cure, this is far worse than Greece.

[justdimin]

First Lebanon now Srilanka declared themself bankruptcy. After the covid-19 break out some countries(especially those whose source of income was from tourism) face severe consequences. Another source of income was exporting quality tea which was also reduced significantly. Srilankan tea brand is infamous in the world. Besides that, some bad decisions from the govt like forbidding tp importation of fertilizer to produce organic foods create food shortages in the country. Mostly covid and govt is to blame for this current situation in Sri Lanka.

It is never a good idea to default on your loans because it would make it incredibly hard to get a loan again. However, sometimes you just need to do it to get better, when you have no other choices left like Sri Lanka.

First of all, it is a government, not like they are a company that can go bankrupt, they are there, they may not be able to pay right now, but that doesn't mean that you can't give them any loans in the future because they may get better after this situation. Secondly, we are talking about having some debt even after this, they are not reaching to zero, they are defaulting on some debt, but they still have some more debt left that they will pay, which will help them gain some credit again.

[Vaskiy]

The blames for such a situation were upon the politicians, covid-19 and improper governance. The country is small by its area, but densely populated. Some has also mentioned China as a reason for its downfall. Maybe that too can have an impact, because China always tires to be friendly with Sri Lanka so to have an naval base in Sri Lanka as India is just few nautical miles away.

Whenever such situation happens with any country there used to be suggestions of using bitcoin as a way to get out of the problem. Here is there anything possible to be done with bitcoin to overcome the bankruptcy.

[bocyaj]

The government should be changed for this.Or else debt can’t be recovered.It may be extreme statement.But it need to be done.Because the new way of approach to the economic will be done by the new government.If the youth of Srilanka get into the parliament,they will do some good changes in the government scheme.The most important one of economic will be changed by the people schemes by government.

[Sithara007]

The government should be changed for this.Or else debt can’t be recovered.It may be extreme statement.But it need to be done.Because the new way of approach to the economic will be done by the new government.If the youth of Srilanka get into the parliament,they will do some good changes in the government scheme.The most important one of economic will be changed by the people schemes by government.

Despite the widespread protests and violence, the government is refusing to resign. And that is understandable. If the opposition comes to power, then Mahinda Rajapaksa and his cronies will be going to jail. He is not going to resign on his own, and the only chance of a regime change arises only if parliamentarians from his own party refuse to support him. The possibility of something like that happening is very remote, but we are getting some hints. 3 of the MPs have come up with statements clarifying that they are withdrawing support to the government (3 MPs from the Sri Lanka Muslim Council: Faizal Cassim, Ishak Rahuman and M S Thowfeek). Previously the regime had support of 156 out of 225 MPs.

[Strongkored]

I also read this sad news on the online news and feel very sad about what is going on in Sri Lanka. What makes me most angry is that many Sri Lanka ministers have fled abroad to secure the assets they have accumulated. I hope the crisis with Sri Lanka will end soon.

If this news is true, then the culprit of all is corrupt officials and this always happens in countries mismanagement that has put Sri Lanka in a worse economic condition and now they are starting to approach the IMF for new debt, the question is whether their officials are able to fix this worse condition which is more troublesome for the poor

https://www.businesstimes.com.sg/government-economy/sri-lanka-to-seek-us3b-to-stave-off-crisis-says-finance-minister

[RealMalatesta]

This is only going to get worse for Sri Lankans. They are in need of food imports and after the government defaulted on loans, who would lend them money now? They'd quickly run out of money buying food and then what happens when that remaining money is gone too? They all gonna starve without aid.

I would say let the people rise up and depose their corrupt leaders and then help restructure after. Just blindly pumping it with aid would only result in the same experience as in Africa where no matter how much aid is sent, nothing really changes since the politicians that are the problem remain in power.

Donations and charity seems to be their best hope. They need to get hold of some celebrities who would be willing to do like concerts for them at this level, that is just an example but at the end of the day we are talking about a situation where all around the world people would need to give them enough money to help them survive.

Do you know what is the scariest and worst part? I am so sick and tired of politicians that I have zero idea about their politicians, no idea who their president is, never even wondered about it, and yet I still worry that if we could raise 50+ million dollars for example, all of that would go to helping people out, I fear some of it could be pocketed by some shady politicians. If you can avoid that, they can get better.

[Kadal Ijo]

The impact of inflation made the economy of Sri rare difficulties and experienced serious problems, several years ago Sri Rare also experienced the same problem, the difficulty of paying debts, and I was sure when Sri Rare could not pay debts, they would sell assets such as ports, airports and so on.

[DVlog]

First of all, it is a government, not like they are a company that can go bankrupt, they are there, they may not be able to pay right now, but that doesn't mean that you can't give them any loans in the future because they may get better after this situation. Secondly, we are talking about having some debt even after this, they are not reaching to zero, they are defaulting on some debt, but they still have some more debt left that they will pay, which will help them gain some credit again.

No, they are not paying anything. Theoretically, they are bankrupt because they have a large sum of debt that they need to pay but they don't have that much reserve left. Their loan is more than 70% of their reserve and you are talking about getting better in time. But how they will do that when they can only offer trade through their native currency which no one will accept. International trade is mostly done with USD which they do not have right now.

No companies will occupy and sell their natural resource to get back their loan. Sri Lanka can not pay their debt by itself but lender by organizations and countries will take it anyway. So the only losing side is Sri Lanka.

[Dhaniii]

During the pandemic, Sri Lanka experienced a major crisis with rising global fuel costs adding to Sri Lanka's woes. Sri Lanka earned nearly US$4 billion (approximately Rp. 57.2 trillion) from tourism in 2019. That's a 90% drop due to the pandemic and Sri Lanka's biggest revenue comes from tourism, but Covid-19 has crippled its biggest financial earner as international flights are suspended.

[Mometaskers]

This is only going to get worse for Sri Lankans. They are in need of food imports and after the government defaulted on loans, who would lend them money now? They'd quickly run out of money buying food and then what happens when that remaining money is gone too? They all gonna starve without aid.

I would say let the people rise up and depose their corrupt leaders and then help restructure after. Just blindly pumping it with aid would only result in the same experience as in Africa where no matter how much aid is sent, nothing really changes since the politicians that are the problem remain in power.

Donations and charity seems to be their best hope. They need to get hold of some celebrities who would be willing to do like concerts for them at this level, that is just an example but at the end of the day we are talking about a situation where all around the world people would need to give them enough money to help them survive.

Do you know what is the scariest and worst part? I am so sick and tired of politicians that I have zero idea about their politicians, no idea who their president is, never even wondered about it, and yet I still worry that if we could raise 50+ million dollars for example, all of that would go to helping people out, I fear some of it could be pocketed by some shady politicians. If you can avoid that, they can get better.

In hindsight my comment was kinda harsh but I'm still of the opinion that the people should be pissed off enough to replace their current politicians. As for the actual aid, maybe crypto can help with that? Send the aid directly to the people that need them rather than have it pass through the hands of the politicians.

Problem of course is that's just for sending money and there maybe not enough food in the markets to buy. There's no getting around to having to send food there. Maybe the same system that would be used to receive the crypto donations can be used to track the food packs sent so it'll be easier to account how much of it is getting to the people. Like they can scan the code on the pack with their phone when they receive it.

Maybe once their government remove the ban on fertilizers, those can then be sent there and maybe NGOs can conduct agricultural training to get their food production up.

[jrrsparkles]

In hindsight my comment was kinda harsh but I'm still of the opinion that the people should be pissed off enough to replace their current politicians. As for the actual aid, maybe crypto can help with that? Send the aid directly to the people that need them rather than have it pass through the hands of the politicians.

Problem of course is that's just for sending money and there maybe not enough food in the markets to buy. There's no getting around to having to send food there. Maybe the same system that would be used to receive the crypto donations can be used to track the food packs sent so it'll be easier to account how much of it is getting to the people. Like they can scan the code on the pack with their phone when they receive it.

Maybe once their government remove the ban on fertilizers, those can then be sent there and maybe NGOs can conduct agricultural training to get their food production up.

As you said even if people get aid from donations still there is no supply of products which is badly needed right now starting from the fuel, electricity, milk, veggies,etc.So individuals can't import goods for themselves without the government help so they are in need of some leader who understand the situation and has the ability to control which will atleast save people from starving to death then they can slowly gain back what they lost due to improper government policies made by group of stupid belong to single family.

[Pujangga]

A very large debt burden while the gross domestic product is very small has made Sri Rare trapped in debt, now Sri Rare must remove all subsidies including education and health which are desperately needed by the people, I believe a long-term economic recession will occur in Sri Lanka and other countries' obligations to help immediately.

[eaLiTy]

~
 Besides that, some bad decisions from the govt like forbidding tp importation of fertilizer to produce organic foods create food shortages in the country. Mostly covid and govt is to blame for this current situation in Sri Lanka.

Note: Neputism is very common in srilanka and most of the important ministry is occupied by brother and relatives of current PM.

The countries that are suffering economically did not just happen just because of the pandemic, it played a part but the most important aspect is the constant bad decisions by the government for several years that have taken them to a situation where they want to depend upon other countries to restructure their loans, in the case of Sri Lanka, they have taken huge loans from China and if China decides they can restructure their loan. Inflation has caught up big time and we understand that Sri Lanka is struggling really bad at this moment.

[Sithara007]

The countries that are suffering economically did not just happen just because of the pandemic, it played a part but the most important aspect is the constant bad decisions by the government for several years that have taken them to a situation where they want to depend upon other countries to restructure their loans, in the case of Sri Lanka, they have taken huge loans from China and if China decides they can restructure their loan. Inflation has caught up big time and we understand that Sri Lanka is struggling really bad at this moment.

It is the same story everywhere. Populist governments around the world are constantly splurging money on welfare schemes, which have no long term impact on the ground. Apart from some short term benefits, these schemes make people more and more unproductive and enslaved to the government handouts. The federal debt rises beyond a sustainable limit as a result of these actions, and in the long term it weakens the national currency and the local economy. In this case Sri Lanka spent tens of billions of USD on wasteful infra projects with zero returns, in addition to welfare schemes.