COLOMBO, Sri Lanka — On Tuesday, debt-ridden Sri Lanka celebrated its 77th year of independence with a military parade, as the newly elected President Anura Kumara Dissanayake committed to rectifying the nation’s economic challenges over his five-year term.
Since achieving independence from British rule in 1948, Sri Lanka faced its most severe economic crisis in 2022, which resulted in the country declaring bankruptcy. This dire situation included halting payments on approximately $83 billion in local and foreign debt, brought about by a foreign exchange crisis that led to critical shortages of essentials such as food, medicine, fuel, and cooking gas, alongside prolonged power outages.
The economic turmoil prompted substantial political unrest, eventually leading to Dissanayake’s party seizing power four months ago.
In his inaugural address in Colombo, Dissanayake expressed his intentions to elevate the living standards of all Sri Lankans, aiming to ensure access to modern scientific and technological advancements during his presidency. He called on the citizens to unite in the pursuit of economic, social, and cultural freedom, stating, “Everyone has a role to play in this struggle.”
A military parade occurred shortly after his speech, showcasing the country’s armed forces.
As part of his agenda, Dissanayake is focused on lifting Sri Lanka out of bankruptcy by restructuring the nation’s immense debt. Following the declaration of bankruptcy, Sri Lanka approached the International Monetary Fund for assistance, resulting in the approval of a $2.9 billion bailout package spread over four years in 2023, contingent upon the restructuring of its debts.
In September, the country announced the completion of its debt restructuring efforts, marking agreements made with both bilateral and multilateral creditors, as well as private bondholders.
Sri Lanka is actively pursuing $17 billion in debt service relief. The underlying causes of the crisis predominantly stemmed from economic mismanagement exacerbated by the repercussions of the COVID-19 pandemic and the 2019 terrorist attacks that severely impacted its vital tourism sector. The pandemic also hindered remittance flows from Sri Lankans employed overseas.
