🌍 Sri Lanka’s Debt Crisis

When poor planning meets global pressure.

In 2022, Sri Lanka made headlines as the first Asia-Pacific country in over two decades to default on its foreign debt. For years, the country had borrowed heavily to fund infrastructure, much of it financed by foreign bonds and loans from China. Meanwhile, tax cuts reduced government revenue, and public spending kept rising.

The pandemic hit tourism- one of Sri Lanka’s main income sources- hard. With fewer dollars coming in, it became impossible to pay for fuel, medicine, or basic imports. Foreign currency reserves collapsed. By mid-2022, the government officially defaulted, leading to nationwide blackouts, mass protests, and the resignation of the president.

An IMF bailout followed, but with strict conditions: reducing spending, increasing taxes, and restructuring debt.

Key lesson: Sustainable development requires long-term planning, diverse revenue sources, and responsible borrowing. Over-reliance on debt, especially foreign debt, can collapse quickly under pressure.

Who do you think was most responsible for Sri Lanka's economic crisis?

• 1. Poor government fiscal planning
• 2. Heavy reliance on foreign debt
• 3. The COVID-19 collapse of tourism
• 4. Global inflation and fuel prices

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