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Sri Lanka fears bankruptcy this year

Sri Lanka fears bankruptcy this year

There are fears Sri Lanka will go bankrupt in 2022 as inflation reaches a record high, food prices spike, and its coffers run dry.

The immediate impact of the Covid crisis, coupled with a loss of tourism has affected the president Gotabaya Rajapaksa led government to implode. This problem is made worse by high government spending and tax cuts eroding state revenues, massive debt repayments to China and foreign exchange reserves that are at their lowest level in more than 10 years.

In the meantime, the government has been printing money to settle domestic loans and foreign bonds, which has caused inflation.

According to the World Bank, over 500,000 people have fallen below the poverty line since the pandemic began, which is the equivalent of five years' progress in eliminating poverty.

In November, inflation reached a record high of 11.1%. Those who previously had plenty are now struggling to feed their families, and basic goods are out of reach, reports The Guardian. According to the report, after Rajapaksa declared Sri Lankans to be in an economic emergency, the military was given authority to set prices for essential items, such as rice and sugar. However, it hasn't significantly eased the people's woes.

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