Sri Lanka is sinking into an abyss of deepening financial and humanitarian crisis. With inflation scaling record highs, food prices zooming, and pandemic-induced disruptions driving its coffers dry, the island nation is feared to go bankrupt this year.

The country needs to repay an estimated $7.3 billion in domestic and foreign loans in the next 12 months, says a report by British newspaper Guardian. This includes g a $500-million international sovereign bond repayment due in January. As of November, the available foreign currency reserves were just $1.6 billion, it said.

Besides the immediate impact of the COVID-19 pandemic and consequent loss of tourism, high government spending and tax-cuts eroding state revenues, vast debt repayments to China, and record low foreign exchange reserves compounded the economic meltdown in front of the Gotabaya Rajapaksa-led government.

A spurt in printing money to square off domestic loans and foreign bonds drove inflation to 12.1 percent in December from 9.9 percent a month back. The monthly inflation measured by the Colombo Consumer Price Index was driven by the monthly increase in prices of both food and non-food items.

December food price inflation soared to 22.1 percent from 17.5 percent a month before, the country’s central bank announced.

The World Bank estimates 500,000 people have fallen below the poverty line since the beginning of the pandemic, the equivalent of five years’ progress in fighting poverty, the report said.

Loss of jobs and vital foreign revenue from tourism, which usually contributes more than 10 percent of the country’s GDP, has been substantial, with more than 200,000 people losing their livelihoods in the travel and tourism sectors, according to the World Travel and Tourism Council.

President Rajapaksa in his New Year message expressed hope of reviving the cash-strapped economy but did not announce measures to address its crippling foreign exchange crisis. “I am confident that the new year will provide an opportunity to further the steps taken by the government to pursue and overcome challenges and strengthen the people-centric economy,” he said.

International rating agencies have downgraded Sri Lanka and raised concerns about its ability to service its debt of $26 billion, reported The Hindu.