Under the epidemic, Sri Lanka's economy suffered heavy losses. Tourism is an important industrial pillar of Sri Lanka. Before the outbreak, the total income of Sri Lanka's tourism industry could reach $3 billion to $4 billion a year. After the outbreak began, the number of foreign tourists plummeted and Sri Lanka's tourism industry stagnated. During the epidemic, the economy was in a downturn and the government began to cut taxes sharply. As a result, Sri Lanka's fiscal revenue plummeted, making it difficult to ensure the basic operation of the country.
Fiscal revenue decreased. In order to cope with government expenditure, Sri Lanka printed money crazily, which contributed to Sri Lanka's inflation rate and the depreciation of Sri Lanka's currency exchange rate. From the chart of Sri Lanka's inflation rate, we can see that since 20021,the inflation rate in Sri Lanka has been soaring, forming an irresistible trend. In June 2022, the inflation rate was as high as 54.6%, breaking through the highest level in history.
In 2022, the Russian-Ukrainian war broke out. Ukraine's oil exports decreased, and Sri Lanka's oil prices rose rapidly. The gasoline tank has been adjusted to an unprecedented height. The continuation of the Russian-Ukrainian war and the extremely high inflation in Sri Lanka have plunged Sri Lanka into an economic crisis and owed huge foreign debts. Today, Sri Lanka's economy has entered a desperate situation. Unable to repay the high foreign debt, the Sri Lankan government declared the country bankrupt. In addition, many countries are also in dire straits. If the world situation remains unchanged, then more countries will face bankruptcy crisis.