Sri Lanka is deep in the debt crisis: A financial expert analyzes the background and those responsible.

Sri Lanka is deep in the debt crisis: A financial expert analyzes the background and those responsible.

According to a report by taz.de,

Sri Lanka is deep in a debt crisis that has worsened in the last two years. The country's economy shrank by 7.8 percent and the poverty rate rose to 25 percent. Sociologist Ahilan Kadirgamar sees the main blame for this crisis in the neoliberal development path set by the IMF and the World Bank.

The country's currency, the rupee, was devalued, causing many imported goods to become 80 percent more expensive. People can no longer afford these goods. Electricity costs have tripled or quadrupled for the poorest. The government has now agreed on a loan of $2.9 billion with the IMF, but this comes with conditions such as spending cuts and privatization.

Sri Lanka's debt crisis is closely linked to the supply crisis and a price shock that have led to mass protests. President Gotabaya Rajapaksa even had to flee the protests in July 2022. China also plays a role in this crisis as the country has financed many projects in Sri Lanka in the past.

However, debt to China only accounts for about 13 or 14 percent of foreign debt. Most debt consists of commercial loans. Sri Lanka is struggling to service this debt, leaving the country facing an uncertain future.

Development finance and the type of projects coming from China or multinational corporations have failed countries in the Global South. Sri Lanka is one of the first countries to go through this debt crisis. There is a possibility that similar crises could occur in other countries.

It is unclear how the global order will evolve in relation to developments in the Brics countries, such as India and China, as well as the World Bank's reform plans. It remains to be seen how the situation in Sri Lanka will develop and what impact this debt crisis will have on other countries.