Sri Lanka Economic Crisis and Sri Lankan Imports & Exports – Explained

13 April 2022
Sri Lanka Trade Data

Sri Lanka is struggling with the worst economic crisis in decades with a massive shortage of essential items. Soaring inflation, huge piles of foreign debt, devalued currency, and depleting foreign currency; the Sri Lankan government is going with everything wrong for the nation’s economy. The situation in Sri Lanka is so bad that people are protesting against the policies of President Gotabaya Rajapaksa and the country has to ask for help from countries including India and China. Let’s try to understand the picture of the Sri Lankan economy from detailed data of the country’s imports and exports.


Sri Lanka economic crisis


Sri Lanka is going through its worst economic crisis since 1948 when the country gained independence. From a shortage of food, fuel, and medicine to long daily power cuts and the cancelation of exams due to lack of paper & ink, the problems of Sri Lanka are myriad. The prices of essential goods like food, fuel, and medicine have sky-rocketed. A kilogram of rice costs 500 Sri Lankan rupees and sugar 290 rupees. When converted into Indian currency, this is approximately Rs 126 and Rs 73 respectively.


Factors behind Sri Lankan economic crisis


Sri Lanka is significantly dependent on imported goods. Among other necessities, it imports food, fuel, paper, sugar, lentils, medications, and transportation equipment. Due to a lack of foreign cash, Sri Lanka is unable to purchase (import) certain goods. Here are the major factors behind the Sri Lankan economic crisis.


The Covid-19 pandemic has taken a toll on the country’s tourism sector, which accounts for 10% of GDP. Due to foreign exchange problems, several countries including Canada have recently issued travel restrictions to their citizens visiting the island country, resulting in negative business on business. India, the United Kingdom, and Russia are the main sources of inbound tourism to Sri Lanka.


The Sri Lankan government’s decision to prohibit the use of chemical fertilizers in order to transition agriculture to 100% organic has a negative impact on the country’s economy.


China is the main contributor to the Sri Lankan crisis with a massive foreign debt burden of approximately $5 billion with China. It also owes a large sum of money to India and Japan.


The supply of foreign exchange was harmed when forex reserves fell from more than $7.5 billion in 2019 to roughly $2.8 billion in July 2021, increasing the amount of money Sri Lankans had to pay to purchase the foreign exchange required to import commodities. As a result, the value of the Sri Lankan rupee has plummeted.


Sri Lanka’s dependency on imports for essential items like pharmaceuticals, cereals, pulses, and sugar has compounded the country’s issues, as the country lacks foreign currency to pay for import expenditures.


Sri Lanka’s trade


Sri Lanka has a trade deficit economy as its imports are more than its exports. According to our database, Sri Lanka imported US$17 billion worth of goods in 2021, while exported US$15 billion worth of commodities last year. In 2020, Sri Lanka’s imports were valued at US$15 billion, and exports were valued at US$10 billion. As compared to 2020 data, both Sri Lanka’s imports and exports declined in 2021.


Talking about 2022 data available of Jan and Feb months, Sri Lanka shipped goods worth US$1 billion and imported products worth US$3 billion. That means Sri Lanka is heavily dependent on countries to import goods.


What does Sri Lanka import? Sri Lanka majorly imports fuel, gold, and semi-finished products of iron or non-alloy steel, fabrics, and vehicles. Here is a list of Sri Lanka’s top imports by chapter reported in 2021.



Chapter

Product

Value US$ Million

84

Machinery, Mechanical Appliances, etc.

1,933

85

Electrical Machinery and Equipment

1,869

60

Knitted or Crocheted Fabrics

1,154

39

Plastics and Articles

973

30

Pharmaceutical Products

924

52

Cotton

726

40

Rubber and Articles

579

72

Iron and Steel

513

48

Paper and Paperboard

511

55

Man-made Staple Fibers

450

 


What does Sri Lanka export? Sri Lanka’s revenue comes mainly from exporting agricultural commodities. Tea, and apparel & clothing are the largest export products. Let’s have a look at Sri Lanka’s top 10 exports by chapter recorded in 2021.



Chapter

Product

Value US$ Million

61

Knitted or Crocheted Apparel & Clothing

3,925

62

Not Knitted or Crocheted Apparel & Clothing

2,360

09

Coffee, Tea, Mate and Spices

2,018

40

Rubber and Articles

1,290

03

Fish and Crustaceans

433

71

Natural or Cultural Pearls & Precious Stones

400

85

Electrical Machinery and Equipment

393

27

Mineral Fuels and Oils

280

84

Machinery, Mechanical Appliances, etc.

273

20

Preparations of Vegetables, Fruits, Nuts & Other Plants

264

 


Conclusion


Sri Lanka has brought upon itself a severe burden. It remains to be seen whether the desperate political measures will help Lanka salvage the economy that’s neck-deep in crisis.


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