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  • Sri Lanka declares state of emergency as economic crisis worsens and demonstrations erupt: 10 updates

    Sri Lanka has inked a $1 billion credit line with India for imports of necessities, and it is seeking an additional $1 billion from the neighboring country.


    Digital Desk: Sri Lanka has imposed a state of emergency amid rising protests over the country's economic woes, which has sparked popular outrage in the South Asian nation. President Gotabaya Rajapaksa declared an emergency a day after hundreds of people gathered outside his residence and chanted slogans demanding his resignation. According to accounts, some individuals were arrested and several were hurt when police used force. The crisis in South Asia comes at a time when Europe is already dealing with one of the bloodiest conflicts in decades in Ukraine.


    Here are ten updates on the economic situation in Sri Lanka:


    1. Rajapaksa was quoted in reports as saying that the decision to declare an emergency was made to ensure public security, public order, and the maintenance of supplies and essential services.


    2. The island country is experiencing one of the biggest economic crises in its history, which began during the epidemic when the tourism industry suffered. On Thursday, protesters clashed with cops outside the president's residence, indicating that people are losing patience.


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    3. Demonstrators reportedly deployed tear gas and water cannons while chanting, "Go home, Gota."


    4. The South Asian country is experiencing 10-hour daily power outages, and numerous areas have reported diesel scarcity.


    5. The IMF (International Monetary Fund) warned of a "solvency crisis" in the country last month. "Based on staff analysis, the fiscal consolidation required to reduce debt to safe levels would need excessive adjustment over the next years, indicating a significant solvency concern," the IMF said in a study, according to Bloomberg.


    6. According to Reuters, the government depreciated its currency sharply ahead of negotiations with the IMF about a loan package in February.


    7. Analysts have blamed the mismanagement of the economy for the crisis. "Sri Lanka is a classic twin deficit economy. Twin deficits signal that a country's national expenditure exceeds its national income, and that its production of tradable goods and services is inadequate," Reuters citied a 2019 Asian Development Bank working paper as saying.


    8. Sri Lanka is saddled with a $4 billion debt and only $2.31 billion in reserves.


    9. The Asian Development Bank, Japan, and China are among the key lenders.


    10. Sri Lanka has inked a $1 billion credit line with India for imports of necessities, and it is seeking an additional $1 billion from the neighboring country.

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