Sri Lanka is currently experiencing one of its biggest economic crises since independence. If you haven’t been following the news, this tragic set of circumstances can be attributable to three major factors.

1. The pandemic wreaked havoc on Sri Lanka’s tourism industry, which accounts for 10% of the country’s GDP.
2. The administration has decided to go “100% organic.” They also outlawed fertilizers to completely actualize this objective. Chemical fertilizers, for example. This hit one of their biggest export commodities — Tea. Since then, Sri Lanka hasn’t been the same.
3. As a result of the cumulative effect, foreign exchange earnings have decreased (Things like dollars and euros). Without sufficient reserves, the country has struggled to pay for imports such as fuel, food, and other necessities.

So, what is Sri Lanka’s plan to get out of this mess?

Most people would tell you that once the tourism industry completely recovers, the normal order of things will be restored. That is, however, easier said than done.

Sri Lanka is currently an undesirable tourism destination. Take, for example, inflation. A kilogramme of rice would have cost the ordinary Sri Lankan between 100 and 150 Sri Lankan rupees in 2021. It now costs around 500 Sri Lankan rupees. It’s not just rice either. A kilogram of milk powder costs 1,945 Sri Lankan rupees today, up from 1,345 Sri Lankan rupees a year ago. Many nations have issued travel warnings to their people about visiting Sri Lanka. It’s bad. Extremely bad.

There’s also the conflict between Russia and Ukraine to consider. According to an Al Jazeera estimate, Russia and Ukraine accounted for almost 25% of all visitors who visited Sri Lanka during January and February. With the battle in full swing, though, that number has plummeted dramatically. As a result, the tourism industry will take some time to fully recover.

Meanwhile, they require assistance. If they don’t, the economic crisis will force them into a long-term slump. That would be disastrous for Sri Lanka’s trading partners, notably India.

So far, all of the neighbouring countries have contributed. The primary priority is to keep the foreign exchange reserves stable. They need more money to bring in oil, food, and other necessities. India has already provided a $1 billion credit line to help with this. They’re also working on a $400 million currency exchange agreement to boost reserves even further.

As an example, Sri Lanka will now be able to borrow $400 million in dollars and repay it in Sri Lankan rupees. This will assist them in maintaining their previous foreign exchange reserve. China and Bangladesh are also contributing with loans and other currency swap deals.

This, however, will not be enough. Sri Lanka is already heavily in debt, totalling around $51 billion. So a simple intervention isn’t going to cut it. They require assistance. A bailout from the International Monetary Fund.

That, though, will come with its own set of limitations. Take Greece, for example. When the country’s economic problems seemed intractable, the IMF and the European Central Bank stepped in to provide billions of dollars in exchange for financial prudence. “Yes, we will support you through the crisis,” the fundamental request stated, “but your government must lower their spending programme, eliminate subsidies, and open your borders to additional trading partners.”

If the IMF intervenes, they will almost certainly impose identical requirements.

1. They’ll almost certainly request that the government drastically reduce their spending programme. There will be no more social welfare schemes.
2. They will almost certainly recommend privatizing public-sector enterprises that are losing money.
3. Additionally, crucially, they’ll almost certainly try to pass new banking laws that give the country’s central bank more authority. A decision that prioritizes long-term gains over short-term gains.

And if Sri Lanka follows these directives, a rescue could be initiated. However, in a country that is already trying to make ends meet, these actions are likely to be immensely unpopular.

So, Sri Lanka’s troubles aren’t going away anytime soon, and I suppose we’ll just have to wait and see what happens.