An In-depth Analysis of Sri Lanka's Economic Crisis

SRINIDHI SAYANI

doi:10.36948/ijfmr.2025.v07i06.62792

An In-depth Analysis of Sri Lanka's Economic Crisis

Author(s)	Ms. SRINIDHI SAYANI
Country	India
Abstract	Sri Lanka’s economic crisis (2019–2024) represents one of the most severe and multidimensional economic collapses in recent South Asian history. Triggered by a combination of fiscal mismanagement, unsustainable borrowing, external shocks, and policy failures, the crisis manifested through hyperinflation, currency depreciation, severe shortages of essential goods, declining foreign reserves, and social unrest. This paper provides a comprehensive analysis of the crisis, employing a mixed-methods research design that integrates quantitative analysis of macroeconomic indicators (GDP growth, inflation, debt levels, foreign reserves) with qualitative analysis of governance, policy interventions, and societal responses. The study includes two detailed case studies: the 2022 sovereign debt default, which illustrates the macroeconomic consequences of unsustainable borrowing, and the social unrest that erupted in response to shortages, inflation, and governance failures, highlighting the human and political dimensions of the crisis. By synthesizing data from IMF and World Bank reports, Central Bank statistics, scholarly articles, and media accounts, the research identifies the structural weaknesses in Sri Lanka’s fiscal, monetary, and policy frameworks that amplified the crisis. Finally, the paper evaluates policy responses and reform measures, including IMF bailout programs, debt restructuring, fiscal and monetary adjustments, and governance reforms. Recommendations focus on long-term strategies for economic resilience, fiscal discipline, institutional transparency, and social safety nets. This research contributes to understanding the complex interplay between economic policy, external shocks, and societal impacts, providing lessons for both Sri Lanka and other emerging economies susceptible to similar crises.
Keywords	Sri Lanka economic crisis , Sovereign debt default ,Macroeconomic instability ,Fiscal mismanagement , Policy reforms
Published In	Volume 7, Issue 6, November-December 2025
Published On	2025-12-17
DOI	https://doi.org/10.36948/ijfmr.2025.v07i06.62792

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An In-depth Analysis of Sri Lanka's Economic Crisis

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