Sri Lanka Economic Crisis and Sri Lankan Imports & Exports – Explained
13 April 2022
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.