Prime minister declared the island nation as 'bankrupt'...

Sri Lanka is going through such a big crisis for the first time since its independence. The island country has passed its deadline to pay off foreign debt and has now been declared bankrupt for the first time. At one time sri lanka was counted among the prosperous countries of Asia but today the situation there is bad. The public is demonstrating from the road to the Rashtrapati Bhavan. The foreign debt is at its maximum and the President and the prime minister are hiding in a safe place. In such a situation, the question arises what is the meaning of bankruptcy of a country.

How is Defaulter declared?

A country is declared bankrupt when its government is unable to repay the loan or installments taken from other countries or international organizations on time. sri lanka was given an exemption till May 2022 to repay the loan of $ 708 million. However, Colombo was not successful in doing so even after additional exemptions and was eventually declared bankrupt. However, at this time the situation in sri lanka has become even worse. people are protesting on the streets and demanding the resignation of the President-Prime Minister.

Sri Lanka's condition is so bad 

The story of the deteriorating condition of sri lanka is almost a decade old. Proximity to china and unaccounted debt made Sri Lanka's situation worse and today the condition is that the country has neither foreign exchange reserves left nor essential things like petrol and diesel. Sri Lanka's foreign exchange reserves stood at $7.6 billion at the end of 2019. This amount was enough for five months of imports in 2020. sri lanka does not have enough money reserves to pay off foreign loans and other foreign exchange payments due to wrong policies and excessive borrowing.

The Sri Lankan rupee was under pressure since the beginning of 2020. Sri Lanka's foreign exchange reserves reached $5.7 billion by the end of 2020 and were $1.6 billion in november 2021. The script of Sri Lanka's plight is a decade old, but in the last three years, wrong policies and heavy debt pressure have brought the situation to this point.