The Crisis in Sri Lanka Serves as a Warning to Other Asian Countries

Sri Lanka is in the grip of a deep and unprecedented economic crisis, which has sparked massive protests and forced its president to resign after fleeing the country - but other countries may face similar difficulties, according to the head of the International Monetary Fund (IMF).

"Countries with high debt levels and limited policy space will face additional strains. Look no further than Sri Lanka as a warning sign," said IMF Managing Director Kristalina Georgieva on Saturday.

She also stated that developing countries have been experiencing sustained capital outflows for four months in a row, putting their hopes of catching up with advanced economies in jeopardy.

Due to a currency crisis, Sri Lanka is struggling to pay for critical imports such as food, fuel, and medicine for its 22 million people. Inflation has risen by approximately 50%, with food prices increasing by 80% over the previous year. This year, the Sri Lankan rupee has lost value against the US dollar and other major global currencies.

Many people blame ex-President Gotabaya Rajapaksa for mismanaging the economy with disastrous policies that were exacerbated by the pandemic. Sri Lanka had amassed massive debt over the years, and last month it became the first country in the Asia Pacific region to default on foreign debt in 20 years.