Anatomy of a Collapse: Origins, Dynamics, and Consequences of Sri Lanka’s Economic Crisis
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Pooja SAHU Department of Economics, Harisingh Gour, a Central University, Sagar, Madhya Pradesh, India
Sri Lanka has struggled for many years with instability, economic stagnation, and a volatile business environment and also struggled with the macroeconomic issue of a double deficit, which includes a fiscal deficit as well as a balance of payments, foreign exchange, and deficit due to years of poor economic management and government corruption. This study analysed the reasons behind Sri Lanka’s economic debt crisis and also explained the debt trap of the Chinese economy, focusing on. The qualitative research method was used with the help of secondary data sources. The findings show the underlying elements that are the primary causes of this situation, including Sri Lanka's excessive reliance on Chinese economic aid and loans, redundant policies of the Sri Lankan government, rising foreign debt to Sri Lanka and also how India assisted Sri Lanka during its crisis and what is the measure taken by the government to fight back the crisis.
© The Author(s) 2025. Published by RITHA Publishing. This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited maintaining attribution to the author(s) and the title of the work, journal citation and URL DOI.
Article’s history: Received 19th of June, 2025; Revised 14th of August, 2025; Accepted for publication 29th of August, 2025; Available online: 1st of September, 2025. Published as article in Volume I, Issue 1(1), 2025
Singh, A. & Sahu, P. (2025). Anatomy of a Collapse: Origins, Dynamics, and Consequences of Sri Lanka’s Economic Crisis Applied Journal of Economics, Law and Governance, Volume I, Issue 1(1), 7-25. https://doi.org/10.57017/ajelg.v1.i1(1).01
Acknowledgments: We sincerely thank my colleagues and mentors for their valuable insights in shaping this research, and acknowledge the support of institutional resources that facilitated data access. I declare no financial or other conflicts of interest influencing the findings of this study.
Funding: The description and reporting of this research has not been supported by any unique grant raised by any funding institution, whether in the public, commercial, or non-profit-making sectors.
Conflict of Interest Statement: The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.
Data Availability Statement: No datasets were generated or analysed during the current study.
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