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Earlier this week, <keyword id="6355572" type="General" weightage="100" keywordseo="sri-lanka" source="Orion">Sri Lanka</keyword> deployed military troops at petrol stations to “discourage any unrest” among thousands of motorists waiting outside for hours to get their tanks filled up. While chaos at petrol stations is not a rare sight in a South Asian country, people dying because of it, is. And this only scratches the surface. What started off as a temporary decline of tourism due to the serial bomb blasts in 2019 turned out to be a huge <keyword id="42511" type="General" weightage="20" keywordseo="economic-crisis" source="Orion">economic crisis</keyword> for Sri Lanka. The local government did try to control the situation with tax cuts and major policy changes in 2019, but it only kept getting worse since then. First, it was the deadly Coronavirus. Then, the inflation. Then, even more debt. India’s southern neighbour is now struggling to provide electricity, fuel and basic essentials to its citizens, leading to a massive unrest among its citizens. The situation is so brim that the country had to cancel school exams due to shortage of paper and lack of cash to buy essentials. The entrepreneurs are unable to do their businesses, the country is running out of foreign exchange, and the recent Ukraine-Russia conflict has led to skyrocketing fuel prices. How did it get so bad in the first place? Sri Lanka has been running a trade deficit for decades, meaning the country imports more than it exports. A large amount of foreign exchange earned by the country is being utilised to pay for the cost of these imported items. Sri Lanka’s <keyword id="6371665" type="General" weightage="20" keywordseo="financial-crisis" source="Orion">financial crisis</keyword> stems from a big shortfall of foreign currency, leaving traders unable to pay for imports. The company’s foreign exchange reserves have been declining since 2019, but it reached a low-point in November 2021 when it only had enough currency to support one month’s imports. While a part of the problem did emerge from the policies of the local government, the rest had to do with the situations that emerged over the last three years. You may remember the serial suicide bombings that took place in Sri Lanka’s top-end hotels and churches, commonly used by Western tourists, in April 2019 and left 250 dead. The blasts scared tourists away from the country and impacted the tourism industry, which represents over a tenth of the country’s gross domestic product (GDP). GDP is the sum of everything a country produces. <div type="image" title="Sri Lanka&amp;#39;s GDP growth rate" msid="90421556" hostid="261" caption="&amp;lt;p&amp;gt;Sri Lanka&amp;#39;s GDP has been declining over the quarters&amp;lt;/p&amp;gt;"></div> Before people could once again feel comfortable travelling to Sri Lanka, COVID-19 had taken over the world and travel restrictions were imposed across the globe. While the country was facing three waves of Coronavirus attacks, price rise was towering in the background and this deteriorated Sri Lanka’s condition even further. Sri Lanka currently has the worst inflation among Asian nations. Inflation or price rise happens when too much money chases too few goods. <div type="image" title="Sri Lanka&amp;#39;s inflation trend" msid="90421641" hostid="261" caption="&amp;lt;p&amp;gt;Sri Lanka&amp;#39;s inflation has skyrocketed in the last four months&amp;lt;/p&amp;gt;"></div> Being a net importer of goods from fuel to medicines to paper, the Russia-Ukraine war could not have come at a worse time since movement of goods has also taken a hit. A few things went wrong on the policy side too Economists believe that Sri Lanka’s debt spiral was already on an unsustainable trajectory even before the pandemic made it worse for the country. The country borrowed foreign funds to fill its reserves, instead of boosting its exports. This move has only added more foreign debt on the country, and has done nothing to boost the local industry. The country’s public debt has increased from 94% of the GDP in 2019 to 119% of GDP in 2019, the <keyword id="6366068" type="General" weightage="20" keywordseo="international-monetary-fund" source="Orion">International Monetary Fund</keyword> (IMF) noted. As the debt was mounting, the Sri Lankan government’s decision to introduce changes to the indirect tax regime in 2019 took a turn for the worse. There were loans to be repaid, the country’s tourism industry was on a decline, cash reserves were falling and these tax cuts reduced government’s revenue even further. When the Britishers left Sri Lanka in the late 1940s, the country was in shambles. The civil war fought by the Liberation Tigers of Tamil Eelam (LTTE) led by Velupillai Prabhakaran – from the 1970s to the late 2000s – didn’t help the economy either. Now, the country is staring at an economic collapse and the scary part is that there are no easy solutions for a catastrophe of this scale. Before we let you go, do check out Business Insider India’s personal finance series Money Insider, which brings together the country’s leading ‘Fin-fluencers’ who are heralding a new beginning in the world of financial literacy <div type="image" title="BI India&amp;#39;s presents Money Insider" msid="90422545" hostid="261" caption="&amp;lt;p style=&amp;quot;margin-left: 20px;&amp;quot;&amp;gt;Business Insider India presents its personal finance series Money Insider&amp;lt;/p&amp;gt;"></div>

SIMPLY PUT: Why Sri Lanka is going through an economic meltdown

<ul><li>The 74-year-old Sri Lanka People's Party (SLPP) leader was administered the oath of office by his younger brother and President Gotabaya <keyword id="60944" type="PERSON" weightage="20" keywordseo="Rajapaksa">Rajapaksa</keyword> at <keyword id="9725887" type="COMPANY" weightage="20" keywordseo="the-rajamaha-viharaya">the Rajamaha Viharaya</keyword> in Kelaniya, a north Colombo suburb, at the auspicious hour of 9:28 am local time.</li><li>This is Mahinda Rajapaksa's fourth innings as <keyword id="71" type="POSITION" weightage="20" keywordseo="Prime-Minister">prime minister</keyword>. Supporters of SLPP lit firecrackers to celebrate his swearing in as the 13th Prime Minister of Sri Lanka.</li><li> The Rajamaha Viharaya, also known as the Kelaniya temple, dates back to 2,500 years. According to the temple website, the shrine has often been associated with the rise and fall of Sri Lanka. </li></ul> Sri Lanka's former president Mahinda Rajapaksa was sworn in on Sunday as the new prime minister at a centuries-old Buddhist temple after his party won a landslide victory in parliamentary elections that allowed the influential family to consolidate power in the island nation. The 74-year-old Sri Lanka People's Party (SLPP) leader was administered the oath of office by his younger brother and President Gotabaya Rajapaksa at the Rajamaha Viharaya in Kelaniya, a north Colombo suburb, at the auspicious hour of 9:28 am local time. This is Mahinda Rajapaksa's fourth innings as prime minister. Supporters of SLPP lit firecrackers to celebrate his swearing in as the 13th Prime Minister of Sri Lanka. The Rajamaha Viharaya, also known as the Kelaniya temple, dates back to 2,500 years. According to the temple website, the shrine has often been associated with the rise and fall of Sri Lanka. There is a popular saying that as the temple rose, Sri Lanka rose and as it fell, the country and its administration fell. It has thus had a deep association with the political powers of the country, the website states. Mahinda Rajapaksa completed 50 years of parliamentary politics in July this year. He was elected as a Member of Parliament at the young age of 24 in 1970. He has since been elected President twice and has been appointed Prime Minister thrice before. He was prime minister between April 2004 and November 2005. He was prime minister for 52 days in 2018, and from November 2019 to August 5, 2020. The SLPP, led by Mahinda Rajapaksa, registered a landslide victory in the August 5 general election, securing two-thirds majority in Parliament needed to amend the Constitution to further consolidate the powerful Rajapaksa family's grip on power. India's High Commissioner to Sri Lanka Gopal Baglay on Saturday became the first envoy to congratulate the new prime minister when he called on Mahinda Rajapaksa. Baglay recalled that Prime Minister Narendra Modi had complimented the people and Government of Sri Lanka on the successful conduct of elections and had acknowledged the impressive electoral performance of the SLPP. He reiterated the strong desire and the commitment of the Indian government to work very closely with the new government and Parliament in Sri Lanka for further strengthening comprehensive bilateral cooperation, the Indian High Commission here said. Mahinda Rajapaksa polled over 500,000 individual preference votes -- the highest ever recorded by a candidate in the country's election history. The SLPP won in 145 constituencies, bagging a total of 150 seats with its allies, a two-thirds majority in the 225-member Parliament. The cabinet ministers, state and deputy ministers are expected to be sworn-in this week. The Rajapaksa family -- including SLPP founder and its National Organiser 69-year-old Basil Rajapaksa, who is the younger brother of Gotabaya Rajapaksa, 71, and Mahinda Rajapaksa -- has dominated Sri Lankan politics for two decades. President Gotabaya Rajapaksa had won the November presidential election on the SLPP ticket. In the parliamentary election, he was seeking 150 seats mandatory to execute constitutional changes, including to repeal the 19th Amendment to the Constitution which had curbed the presidential powers while strengthening the role of Parliament. Activists, already alarmed by the diminishing space for dissent and criticism in the island nation, fear such a move could lead to authoritarianism. The biggest casualty from the election outcome was the <keyword id="289630" type="COMPANY" weightage="20" keywordseo="United-National-Party">United National Party</keyword> (UNP) of former prime minister Ranil Wickremesinghe which managed to win only one seat. The country's grand old party failed to win a single seat from any of the 22 districts. UNP leader and four-time prime minister <keyword id="9725889" type="PERSON" weightage="20" keywordseo="wikremesinghe">Wikremesinghe</keyword> was unseated for the first time since he entered Parliament in 1977. Mahinda Rajapaksa earlier served as the country's president from 2005-2015, a period which was mired by allegations of human rights abuses, especially against the Tamils. He enjoys cult status among the 77 per cent Sinhala majority community for his action to end the brutal nearly three-decade-long civil war in the island nation with the defeat of the Liberation Tigers of Tamil Eelam (LTTE) in 2009. The LTTE led by its leader Velupillai Prabhakaran had waged a violent campaign in the nation to carve out a separate Tamil homeland in the north and east of the island. The military during Mahinda Rajapaksa's regime as president defeated the rebel group, a task all his predecessors since 1972 had failed to achieve. SEE ALSO: <a href="https://www.businessinsider.in/business/corporates/news/tech-mahindra-cfo-says-lateral-hiring-will-take-time-and-only-after-utilisation-improves-to-pre-covid-levels/articleshow/77440879.cms">Tech Mahindra CFO says lateral hiring will take time — and only after utilisation improves to pre-COVID levels</a> <a href="https://www.businessinsider.in/business/startups/news/how-karan-bajaj-sold-his-less-than-18-month-old-startup-white-hat-jr-to-byjus/articleshow/77415329.cms">A WhatsApp message, six weeks of talks and a $300 million deal – how Karan Bajaj sold his less than 18-month old startup White Hat Jr to Byju’s</a>

Mahinda Rajapaksa takes oath as the Prime Minister of Sri Lanka for the fourth time

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SIMPLY PUT: Why Sri Lanka is going through an economic meltdown

Mahinda Rajapaksa takes oath as the Prime Minister of Sri Lanka for the fourth time

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