Question:
A major trigger for Sri Lanka’s economic crisis in the year 2022 was
(1) a significant decline in remittances from migrant workers.
(2) excessive appreciation of the Sri Lankan rupee.
(3) a sharp increase in global oil prices.
(4) a decrease in the production of chemical fertilizer.
(5) an unsustainable accumulation of foreign debt.
Correct Answer:
(5)
Answer Explanation:
While many factors contributed (like COVID-19 and tax cuts), the fundamental macroeconomic root cause of the 2022 crisis was the historical, unsustainable accumulation of external sovereign debt. This exhausted foreign exchange reserves and ultimately led to the country’s first-ever sovereign default.
Topic: Sri Lankan Economy Year: 2024
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