The crisis-ravaged Sri Lankan government has said it will print more money and cut infrastructure spending to appease a volatile population. However, the government admits that printing more money could push inflation up to 40%.
Print more money as a solution
Prime Minister Ranil Wickremesinghe said the crisis-hit Sri Lankan government now expects inflation in the country to exceed 40% after defaulting for the first time. With the country now facing a severe revenue shortfall, authorities have said they intend to print nearly $2.8 billion (1 trillion rupees) worth of currency to partially fund government welfare programs.
According to remarks post In commercial standards, Wickremesinghe conceded that putting 1 trillion rupees into circulation could lead to more difficulties and further instability in the country. However, the recently appointed prime minister insists that the reforms his government is making are aimed at improving the welfare of the people.
Looking ahead to the tough days ahead, there must be protests. When people suffer, it is only natural that they must protest. But we want to make sure it doesn’t destabilize the political system. As far as the interim budget is concerned, it’s just cutting spending, cutting it where possible and shifting it to benefits.
Sri Lanka’s economic woes have been triggered by the Covid-19 pandemic, which has disrupted the country’s tourism industry, according to the Business Standard report. Some critics, however, put the blame on President Gotabaya Rajapaksa’s government, which approved the tax cuts, which they say has led to a further drop in revenue flowing into government coffers.
Sri Lanka’s debt default
Meanwhile, Al Jazeera Report Implying that the country’s failure to meet its debt obligations related to coupon payments led to Sri Lanka’s first default. The $78 million outstanding coupon originally due on April 18 was not paid when the 30-day grace period expired on May 18.
The Prime Minister gave reasons for the conclusion that Sri Lanka had defaulted, saying:
“We are in a pre-emptive default. There can be a technical definition…from their perspective, they can see it as a default. Our position is very clear that we cannot repay until the debt is restructured.”
Besides printing more rupees, Prime Minister Wickremesinghe’s government is also reportedly planning to cut infrastructure spending. Funds raised from spending cuts will fund a two-year relief program.
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