Sri Lanka has recently declared bankruptcy. You need to know how difficult and restricted it is for a person to declare bankruptcy. So what will it look like after a country goes bankrupt?

Sri Lanka is a famous tourist destination in everyone's mind, but unexpectedly it has now turned into a hell on earth. Sri Lanka has recently declared bankruptcy. You must know how difficult and restricted it is for a person to declare bankruptcy. So what will it look like after a country goes bankrupt? What are the reasons for the current consequences? Let’s analyze and discuss it.

First, what happened to Sri Lanka after it went bankrupt?

1.Severe material shortages and severe inflation are tearing apart the thin bodies of the people. About 30% of families in Sri Lanka face the threat of hunger; 70% of families reduce their meals from three meals a day to two. Sri Lanka's inflation rate is expected to exceed 60%, especially food prices, which have soared by 80%.

2. Most functional departments ceased operations. Sri Lanka no longer has money to pay wages, iron rice bowls have become broken rice bowls, and functional departments have closed down. Then all the orderly rules, order, and regulations in the past have become unfeasible and have turned into disorder.

3. Demonstrations and unrest occurred frequently. The economy has stagnated, and the number of unemployed people continues to increase. People will definitely blame managers and hope to change the status quo. Then demonstrations and turmoil will become a means of catharsis, and public security problems will become serious.

4. We owe huge foreign debts. Since it is bankruptcy, it means that the debt owed cannot be repaid. Sri Lanka currently owes a total of about US$51 billion in foreign debt, of which US$5.1 billion is owed in loans to major Eastern countries, with the largest debt owed to Japan. 80% of Sri Lanka's debt is borrowed from international countries in the form of sovereign bonds, term financing instruments, etc.

Secondly, what is the reason for the current bad consequences?

1. There is a problem with income. Sri Lanka's main economy relies on black tea exports and specialty tourism. However, in 2020, 2021, and 2022, when the epidemic is shrouded, the demand for black tea has dropped sharply. Traveling to Sri Lanka from abroad has become more troublesome. The income cannot be sustained. In addition, with such foreign debts, it comes faster than it goes. It would be strange not to go bankrupt. .

2. Why is there so much foreign debt? In the past, Sri Lanka carried out a large number of new infrastructure projects and tax cuts. Infrastructure construction is very expensive, and tax cuts have further reduced income. The country can only borrow money to live, and is heavily in debt.

3. The United States has raised interest rates and has shrunk its balance sheet. The return of US dollar-based capital has accelerated the outflow of capital from small countries like Sri Lanka, making the debt crisis more serious in the short term. In fact, Sri Lanka is not the only country that is bankrupt. Last year, , Brazil, and also declared bankruptcy. Currently, there are 26 bankrupt countries.

4. The conflict between Russia and Ukraine has led to higher international energy and material prices. Sri Lanka needs to pay additional costs to obtain foreign materials and energy, accelerating the depletion of foreign exchange reserves.

2022 is destined to be a difficult year, everyone must hold on!