Why Sri Lanka is facing a Crisis? UPSC


In this article, we will understand why Sri Lanka is facing a crisis, and how china’s policy brings the Srilanka crisis. Moreover, we will discuss the role of India in the Sri Lanka crisis.

Why Sri Lanka is facing a Crisis?

In January 2017, Srilanka’s southern port city named Humbantota echoed with protest. That was associated with China’s expansion & depth trap policy. This port was made by china’s high-interest loan and the Srilankan government was not able to maintain this port. So, it was handed over to China on a 99-year Lease. Moreover, Sri Lankan Government also built a 15,000-acre industrial zone for the Chinese companies, attached to this port.

Many Sri Lankan citizens why protesting against the Chinese occupation of Hambantota Port. For them, the question was not just about giving up their land but Sri Lanka was going to hand over its autonomy to China. They feared that the Hambantota Port would turn into a Chinese colony. Moreover, this fear after 5 years stands as a bitter truth. Today, Sri Lanka is standing in such an economic crisis that its foreign reserves have run out. Additionally, Srilanka is not able to pay his Dollar 7 billion foreign debt.

What are the Economic Crises in Sri Lanka?

Inflation has reached 15% and a serious shortage of goods is being felt, from crude oil to milk powder. This crisis is not sudden. But, Sri Lanka depended on foreign loans to engage in financing foreign imports to complete its foreign debt and china became one of the biggest foreign lenders. Srilanka builds Hambantota deep sea port, UN conference Center, and Rajapaksa Airport with Foreign loan.

Srilanka is now forced to apply for a bailout from the IMF and sell off its key National assets. This seems awkward but, selling sovereign properties and territories is not a new thing. The sale or purchase was not of countries but of the parts of that country. In this article we will discuss some examples and what are those situations where one has to decide to sell sovereign rights to a country. Is it a common practice for emergency measures?

What happened in Sri Lanka & Why Sri Lanka is facing a crisis?


Just a few years ago, this small Island was leading the Human Development Index in the world including health, socioeconomic, and education parameters. Due to civil war, foreign policies, faulty macroeconomics, autocratic decision-making, and political instability, Sri Lanka got stuck in this quagmire. The global financial crisis in 2008, and the civil war in 2009, makes Srilanka’s current account deficit unstable.

In 2019, Easter Bomb Blast negatively impact the tourism industry of Sri Lanka. Moreover, due to the Covid pandemic Tax Revenues and tourism totally collapsed. China came forward in this economic journey of Sri Lanka. During 2005-10, China offered loans worth about dollar 1.4 Billion without investigating whether these projects are economically viable or not, and what will be their social impact.

Again China provided a dollar of 3.1 Million. Eventually, China wants to build a network of client states. Moreover, Chinese officials wanted to develop these projects for money, regardless of whether they would be commercially sound or not. That’s why China announces the biggest investment in the Colombo Port city project. It is being planned as a major financial hub with an estimated cost of Dollar 14 billion. China has reclaimed 269 hectares of land of Indian origin. In return, China has got 116 hectares of land on 99 year Lease. Moreover, it looks like Sri Lanka will never come out of the Chinese dept.

What is India’s role in Sri Lanka Crisis?

India also exerts a significant influence over Sri Lanka. India is a trusted partner of Sri Lanka through political and economic influence. India had become the top lender in the first four months of the financial year by providing financial aid of dollar 376 million. Moreover, the Adani group signed a dollar 700 million deal with Sri Lanka to develop a deep sea water container terminal. That can act as a strategic game changer in indo-china competition. In the coming days, India can play a major supporting role in Sri Lanka. India can support solar energy networks in  Sri Lanka through International Solar Alliance. Through Investments without increasing Sri Lanka dept stress, India can provide a fair deal.

Here you understand, Why Sri Lanka is facing a crisis. If you want to read a similar article click on the link below.


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Vikramjit Singh, founder of Newscoop, an esteemed UPSC educational website, helps aspirants prepare for UPSC CSE with 5 years of experience, offering a deep understanding of crucial concepts.

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