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Sri Lanka: Why is the country in an economic crisis? Sri Lanka: Why is the country in an economic crisis?
(1 day later)
Soldiers guard the office of Sri Lanka's prime minister as a state of emergency is declared Sri Lankan Prime Minister Ranil Wickremesinghe has told the country's military to do "whatever is necessary to restore order", after protesters stormed his office.
A state of emergency has been declared in Sri Lanka, and President Gotabaya Rajapaksa has fled the country. A state of emergency was declared after President Gotabaya Rajapaksa fled the country.
His departure follows months of mass protests over soaring prices and a lack of food and fuel. His departure followed months of mass protests over the island's deepening economic crisis.
The country's foreign currency reserves have virtually run dry, and it has already missed debt interest payments. Sri Lankan PM tells military to restore order
Sri Lanka's president flees country on military jet A dramatic day and moment of danger for Sri Lanka
Rajapaksa told: 'Quit now or face massive protest'
What has been happening in Sri Lanka?What has been happening in Sri Lanka?
The price of everyday goods has risen sharply. Inflation is running at more than 50%. Protests which started in the capital, Colombo, in early April have become larger and spread across the country.
There have also been widespread power cuts. For months, people have been struggling with daily power cuts and shortages of basics such as fuel, food and medicines.
A lack of medicines has brought the health system to the verge of collapse. Inflation is running at more than 50%.
The country doesn't have enough fuel for essential services like buses, trains and medical vehicles, and officials say it doesn't have enough foreign currency to import more.The country doesn't have enough fuel for essential services like buses, trains and medical vehicles, and officials say it doesn't have enough foreign currency to import more.
This lack of fuel has caused petrol and diesel prices to rise dramatically since the start of the year.This lack of fuel has caused petrol and diesel prices to rise dramatically since the start of the year.
In late June, the government banned the sale of petrol and diesel for non-essential vehicles for two weeks. It's thought to be the first country to do so since the 1970s. Sales of fuel remain severely restricted.In late June, the government banned the sale of petrol and diesel for non-essential vehicles for two weeks. It's thought to be the first country to do so since the 1970s. Sales of fuel remain severely restricted.
Schools have closed, and people have been asked to work from home to help conserve supplies.Schools have closed, and people have been asked to work from home to help conserve supplies.
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Watch: Protesters storm Sri Lankan president's palace in Colombo, swim in the pool and set the PM's house on fire Watch: Police fire tear gas at Sri Lanka protesters storming the prime minister's office
Watch: Protesters storm Sri Lankan president's palace in Colombo, swim in the pool and set the PM's house on fire Watch: Police fire tear gas at Sri Lanka protesters storming the prime minister's office
What happens when a country runs out of money?What happens when a country runs out of money?
As well as not being able to buy goods it needs from abroad, in May Sri Lanka failed to make an interest payment on its foreign debt for the first time in its history. As well as not being able to buy goods it needs from abroad, in May, Sri Lanka failed to make an interest payment on its foreign debt for the first time in its history.
The country had been given 30 days to come up with $78m (£63m) to cover the interest due, but central bank governor P Nandalal Weerasinghe said it could not pay. The country had been given 30 days to find $78m (£63m) to cover the interest due, but central bank governor P Nandalal Weerasinghe said it could not pay.
Long queues for fuel - like this one in Colombo - have made normal life impossibleLong queues for fuel - like this one in Colombo - have made normal life impossible
Two of the world's biggest credit rating agencies also confirmed Sri Lanka had defaulted on its debt payments.Two of the world's biggest credit rating agencies also confirmed Sri Lanka had defaulted on its debt payments.
Failure to pay debt interest can damage a country's reputation with investors, making it harder for it to borrow the money it needs on international markets. This can further harm confidence in its currency and economy.Failure to pay debt interest can damage a country's reputation with investors, making it harder for it to borrow the money it needs on international markets. This can further harm confidence in its currency and economy.
Is there a plan to solve the crisis? What's the plan to tackle the crisis?
President Rajapaksa has appointed Prime Minister Ranil Wickremesinghe as acting president in his absence. President Rajapaksa promised to step down, after protesters occupied his official residence, but has not yet submitted a formal letter of resignation. He has made Prime Minister Ranil Wickremesinghe acting president in his absence.
Mr Wickremesinghe has declared a state of emergency across the country and a curfew has been imposed in the western province while he tries to stabilise the situation. Mr Wickremesinghe declared a state of emergency across the country and imposed a curfew in the western province while he tries to stabilise the situation.
Mr Rajapaksa's departure ends a family dynasty that has dominated Sri Lanka's politics for the past two decades But, on Wednesday, hundreds of protesters stormed his office, amid calls for his resignation.
Sri Lanka's government has more than $51bn (£39bn) in foreign debt, $6.5bn of which is owed to China, and the two countries are in negotiations about how to restructure the debt. Mr Wickremesinghe has been prime minister six times, without seeing out a full term in office
The G7 group of leading industrial countries - Canada, France, Germany, Italy, Japan, UK and the US - had said it supports Sri Lanka's attempts to reduce its debt repayments. The president's departure threatens a potential power vacuum in Sri Lanka, which needs a functioning government to tackle the financial crisis.
The country owes more than $51bn (£39bn) to foreign lenders, including $6.5bn to China, which has begun discussions about restructuring its loans.
The G7 group of countries - Canada, France, Germany, Italy, Japan, UK and the US - had said it supports Sri Lanka's attempts to reduce its debt repayments.
The World Bank has agreed to lend Sri Lanka $600m, and India has offered at least $1.9bn.The World Bank has agreed to lend Sri Lanka $600m, and India has offered at least $1.9bn.
The Sri Lankan government has also been in talks with the International Monetary Fund (IMF) about a possible $3bn (£2.5bn) loan. The International Monetary Fund (IMF) is discussing a possible $3bn (£2.5bn) loan.
The IMF - which works with its 190 member countries to stabilise the world economy - said the government would have to raise interest rates and taxes as a condition of any deal. But it would require a stable government that could raise interest rates and taxes to help fund the deal, so any bailout may be delayed until a new administration is in place.
It would also require a stable government to be in place, so any bailout may be delayed until a new administration takes over.
Banging dishes together to protest at the food price hikes.Banging dishes together to protest at the food price hikes.
Acting President Wickremesinghe had already said the government will print money to pay employees' salaries, but has warned this is likely to boost inflation and lead to further price hikes. Mr Wickremesinghe had already said the government would print money to pay employees' salaries, but warned this would be likely to boost inflation and lead to further price hikes.
He also said state-owned Sri Lankan Airlines could be privatised.He also said state-owned Sri Lankan Airlines could be privatised.
The country has asked Russia and Qatar to supply it with oil at low prices to help reduce the cost of petrol.The country has asked Russia and Qatar to supply it with oil at low prices to help reduce the cost of petrol.
What led to the economic crisis?What led to the economic crisis?
The government has blamed the Covid pandemic, which affected Sri Lanka's tourist trade - one of its biggest foreign currency earners. The government blamed the Covid pandemic, which badly affected Sri Lanka's tourist trade - one of its biggest foreign currency earners.
It also says tourists were frightened off by a series of deadly bomb attacks in 2019.It also says tourists were frightened off by a series of deadly bomb attacks in 2019.
However, many experts blame economic mismanagement. However, many experts blame President Rajapaksa's poor economic mismanagement.
President Rajapaksa faced widespread calls to step down Mr Rajapaksa's departure ends a family dynasty that has dominated Sri Lanka's politics for the past two decades
At the end of its civil war in 2009, Sri Lanka chose to focus on providing goods to its domestic market, instead of trying to boost foreign trade.At the end of its civil war in 2009, Sri Lanka chose to focus on providing goods to its domestic market, instead of trying to boost foreign trade.
This meant its income from exports to other countries remained low, while the bill for imports kept growing.This meant its income from exports to other countries remained low, while the bill for imports kept growing.
Sri Lanka now imports $3bn (£2.3bn) more than it exports every year, and that is why it has run out of foreign currency.Sri Lanka now imports $3bn (£2.3bn) more than it exports every year, and that is why it has run out of foreign currency.
At the end of 2019, Sri Lanka had $7.6bn (£5.8bn) in foreign currency reserves, which have dropped to around $250m (£210m).At the end of 2019, Sri Lanka had $7.6bn (£5.8bn) in foreign currency reserves, which have dropped to around $250m (£210m).
Former President Rajapaksa had also been criticised for big tax cuts he introduced in 2019, which lost the government income of more than $1.4bn (£1.13bn) a year. Mr Rajapaksa was also criticised for big tax cuts he introduced in 2019, which lost the government income of more than $1.4bn (£1.13bn) a year.
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The switch to organic fertilisers resulted in widespread crop failure, exacerbating foreign currency shortagesThe switch to organic fertilisers resulted in widespread crop failure, exacerbating foreign currency shortages
When Sri Lanka's foreign currency shortages became a serious problem in early 2021, the government tried to limit them by banning imports of chemical fertiliser.When Sri Lanka's foreign currency shortages became a serious problem in early 2021, the government tried to limit them by banning imports of chemical fertiliser.
It told farmers to use locally sourced organic fertilisers instead.It told farmers to use locally sourced organic fertilisers instead.
This led to widespread crop failure. Sri Lanka had to supplement its food stocks from abroad, which made its foreign currency shortage even worse.This led to widespread crop failure. Sri Lanka had to supplement its food stocks from abroad, which made its foreign currency shortage even worse.