Whatever Happened to Sri Lanka?

Months ago we covered the crisis in Sri Lanka as the country fell into chaos amid shortages of critical supplies, including fuel and food. Evidently, it was proven that the crisis was caused in large part by the country’s financial mismanagement and resulted in foreign currency reserve depletion. This nightmare had been brewing for years, however, the pandemic and resulting financial volatility made the problem boil over, to a degree so drastic that the country needed an IMF bailout and a restructuring of foreign debt.
Sri Lankan Protestors
In the months following the crisis, domestic consumers, poorer than most with a GDP per capita of $3814 USD, have experienced dramatic increases in inflation. Although food inflation has begun to decrease slowly, dropping to 80.9% YoY in October relative to 85.8% YoY in September, this astronomical increase in prices has left many unable to live normally.
Sri Lanka has been undertaking unconventional measures to ensure a more stable future for their finances. For one, they are approaching the United Nations to try and negotiate a debt relief deal based on nature conservation efforts. The deal would be structured as a debt-for-nature deal, with the current figure ballparked at $1B USD. Bonds dated throughout the late 2020s have since jumped as a result. The country has also repealed the highly controversial ban on glyphosate fertilizers, giving hope to the idea that the nation’s fields will be full once again.
Ways they’re attempting to fix the problem aside, how big of a hole is the country in? Well, there’s good news and bad news. The country’s $51B debt prior to restructuring represented roughly $2318 USD of debt per resident; since April, they’ve been able to bring that down to $46B, representing a 9.8% decline.
That being said, the country has a long way to go before their debt load is seen as sustainable and one major roadblock to that sustainability is China. China is Sri Lanka’s largest sole foreign creditor, holding 52% of the $14B in bilateral debt that the country owes. Unfortunately, as the IMF begins to step in, China is not willing to take any haircuts on the loans, resulting in Sri Lanka reassuming liability over $1.7B in loans dished out to state enterprises.
As for the people, they are still experiencing heavy tariffs on, and shortages of essential resources, however a light at the economic tunnel has opened, granting a glimmer of hope to the struggling nation.